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Pressure is on for Google to recreate past success

Google co-founder  Sergey Brin walks the runway wearing new product "Glass by Google" after the Diane von Furstenberg Spring/Summer 2013 collection show during New York Fashion Week September 9, 2012.

Andrew Kelly/Reuters

The world's biggest search engine reports its quarterly results this week, as it faces pressure to recreate its desktop-era success in the mobile world.

Google Inc. releases its fiscal first-quarter earnings after market close on Wednesday. The company's stock price is up about 34 per cent over the past year, with much of that growth coming since October. On average, analysts expect the company to post adjusted earnings per share of about $6.40 (U.S.). During the same period last year, EPS was $11.58, but that was before a recent stock split.

Earlier this month, the company initiated a 2-for-1 stock split that may make Google shares more accessible to average investors, but also gives Google's founders greater control over the company's direction. One class of new shares carries no voting power, and it is expected that this class will be the primary one for future share issues.

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Investors will be primarily interested in the health of the company's core search products. But they will also pay close attention to the gap in profitability between traditional search and desktop-based offerings, where ad revenue is relatively healthy but growth is not as rapid, and Google's myriad mobile products, where growth is meteoric but ad rates tend to be relatively small.

Google recently sold off its Motorola Mobility division to Lenovo, a PC maker based in China, for $2.9-billion. The sale price is a fraction of the $12.5-billion that Google paid for the company in 2011, but the divestiture will likely have a positive effect on operating income, given the losses Motorola contributed to the company. In addition, Google will maintain access to the massive Motorola patent portfolio.

Like other major tech players, Google has been rocked by allegations that government spy agencies have been surreptitiously spying on its customers – so much so that the company joined a coalition of technology giants lobbying the U.S. government for more transparency on digital surveillance. However such concerns have so far not taken a significant toll on Google's share price or its bottom line.

Investors will still want to know whether the company has lost potential clients – particularly for its cloud computing offerings – as a result of the spying allegations.

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