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18.1.12

Ahead of the Bell: Google 4Q Earnings May Top $3B



Google Inc. is expected to surpass another financial milestone when the Internet search leader releases its fourth-quarter results Thursday afternoon.

If analyst forecasts pan out, it will be the first time that Google has earned at least $3 billion in any three-month period since the company started in a rented Silicon Valley garage in 1998. It would be the third straight quarter that Google's net income has increased by at least 20 percent from the previous year.

The streak of steady growth has occurred since Google co-founder Larry Page replaced Eric Schmidt as CEO in early April. Google's performance since then has eased worries among investors that the company's earnings would falter under Page, who has made it clear he is willing to sacrifice short-term profits to pursue projects that might not pay off for years.

Wall Street now seems more confident that Page will ensure Google remains a well-oiled moneymaking machine. The company's stock price has gained 7 percent since Page became CEO while the technology-driven Nasdaq composite index has dipped by about 1 percent during the same period. Google shares closed Wednesday at $632.91.

Although it also has become a force in mobile software, e-mail, Web browsers and online video, Google still depends on its dominance of search to bring in most of its revenue.


Becoming the go-to place to find things online has also turned Google into the Internet's biggest advertising hub. Being in that position paid off during the final three months of the year as more people did their holiday shopping on Internet-connected computers and mobile devices.

The digital shopping spree spurred more Google searches as consumers looked for the best prices and things to do during the holidays. That, in turn, led to more clicks on the ads that Google sells.

Google probably faced its biggest challenges in Europe, where earnings were hurt by a weakening euro as the continent wrestled with unwieldy government debts.

The fourth-quarter earnings could be even better than analysts expect if Google eased its hiring at the end of the year. Through September, Google had already added nearly 7,000 workers in 2011 — the largest payroll expansion in the company's 13-year history. Google CEO Larry Page indicated in October that the company had expanded its workforce more than he anticipated — a remark that could have foreshadowed a slight slowdown in new hires.

A conference call scheduled shortly after the fourth-quarter earnings come out will give Page and other executives to update investors on the expansion of the Plus service that Google introduced nearly seven months ago as an alternative to Facebook's popular online social network. Google disclosed Plus had more than 40 million users in October, but hasn't provided additional figures since then.

Facebook has more than 800 million users, so Plus has a long way to go before it poses a serious threat in social networking.

Analysts polled by FactSet expect that Google earned $10.50 per share, excluding the company's expenses for its employees' stock compensation. Revenue is expected to rise 31 percent from last year to nearly $8.4 billion, after subtracting ad commissions.

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