Shares of Google Inc. soared to a record Friday after the world's No. 1 Internet search engine reported quarterly profit that soared sevenfold and sales that nearly doubled, results that topped the most optimistic analyst targets.
“We surprised ourselves this quarter,” Google CEO Eric Schmidt said Thursday. “Business was much stronger than I expected.”
Google stock, which has climbed 57 per cent this year, rose to a high of $346.43 Friday morning on the New York Stock Exchange. At last check, the stock was up $36.33 or 12 per cent at $339.53. The stock's previous high of $321.28 was reached earlier this month.
When Google shares commanded $85 a share in their August 2004 initial public offering, the prospect the stock quadrupling in less than 15 months ago seemed inconceivable. It doesn't appear far-fetched now.
A number of analyst raising their Google stock estimate to above $400 (U.S.) in the wake of the better-than-expected third-quarter results.
RBC Capital Markets analyst Jordan Rohan hiked his Google stock target by a third to $450 from $340, saying that the company “crushed the quarter.”
After the close of trading Thursday, the Mountain View, California-based company said its profit surged 633 per cent to $381.2-million or $1.32 a share from $52-million or 19 cents a year ago.
Excluding certain items, Google earned $1.51 a share. Analysts were expecting earnings of $1.36 a share, on average.
The company's net sales rose 96 per cent to $1.58-billion in the period ended Sept. 30 from $805.9-million last year.
Sales, excluding fees passed on to other websites for displaying ads, came in at $1.05-billion, above an analyst consensus target for $944-million, provided by Thomson First Call.
Google-owned sites generated 56 per cent or $885-million of the company's overall sales. Revenues from Google's partner sites, through AdSense programs, generated 43 per cent or $675-million of total sales, the company said.
“They are crushing” all expectations, said American Technology Research analyst David Edwards. “They have an incredibly efficient business model.”
The most recent profit — the highest for any three-month period since Google's inception seven years ago — came during a typically slow season for Internet companies because people spend less time at their computers during the summer.
Google executives also had warned that it might be difficult for the company to post substantial increases from last year's third quarter when a flood of publicity devoted to its August 2004 initial public offering helped drive more traffic to its Web site.
But the introduction of new products, such as instant messaging, and upgrades to existing services, such as mapping, helped Google attract more summer traffic than anticipated, executives said during a Thursday conference call.
“We are effectively connecting with users and customers in relevant ways,” Mr. Schmidt said.
Excluding ad commissions, Google's third-quarter revenue growth accelerated by 18 per cent from the second quarter. Not even the most bullish analyst believed Google's sequential revenue increase would be above 10 per cent.
Even as the company diversifies, Google's online search engine remains the company's moneymaking hub, shrugging off stiffening competition from its biggest rivals, Yahoo and Microsoft Corp.
Google handled 45 per cent of U.S. search requests in September, outdistancing 23 per cent for Yahoo Inc. and 12 per cent for Microsoft's MSN, according to research released Thursday by Nielsen/NetRatings.
As an ever-growing audience flocks to Google's search engine to find information, more advertisers want to have their Web links displayed alongside search results related to their products and services.
The increased ad demand is enabling Google to boost its profit at a breathtaking pace — something it needs to do to support its lofty stock price.
In its quest for more profit, Google wants to build a free high-speed wireless Internet access service in San Francisco to ensure more people in that city can connect to its search engine and, theoretically, click on its ads. If San Francisco picks Google's proposal over 25 others, the company plans to begin building the wireless network immediately, Schmidt said.
Google also has teamed up with Comcast Corp., the nation's largest cable company, to explore buying a minority stake in Time Warner Inc.'s AOL. Yahoo and Microsoft also are stalking AOL, an alliance that would hurt Google because AOL is its biggest advertising partner.
Mr. Schmidt deflected analyst questions about the AOL courtship during Thursday's conference call. “They are a very, very valued partner and we hope it will be true forever,” he said.
Google's growth is helping to fund a steady expansion of its work force. The company hired another 806 employees between June and October, expanding its payroll to just under 5,000 workers.
With files from Associated Press.
