Google Profit Rises On Ad Revenues; Stock Up

(RTTNews) - Google Inc. (GOOG) on Thursday reported an increase in fourth-quarter profit on higher ad revenues, even as the bottomline missed Wall Street estimates.

But investors were impressed with the results, given the spike in Google's aggregate paid clicks and over the deal to divest its loss-making Motorola Mobility smartphone unit to Lenovo. Google shares were up about 5 percent in after-hours trade on the Nasdaq.

While Google has been battling lower payments from advertisers due to the shift in traffic to less-remunerative mobile devices, it continues to be the most sought after in web search business. The fourth quarter is the strongest for Google due to the spurt in retail advertising.

Google said its aggregate paid clicks during the quarter jumped 31 percent year-over-year, while payment from advertisers - average cost-per-click - fell 11 percent.

The Mountain View, California-based search engine giant posted quarterly net income of $3.38 billion or $9.9 per share, compared with $2.89 billion or $8.62 per share last year.

Excluding items, adjusted earnings for the quarter climbed to $4.1 billion or $12.01 per share from $3.57 billion or $10.65 per share a year ago.

On average, 42 analysts polled by Thomson Reuters expected earnings of $12.26 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 17 percent to $16.86 billion from $14.42 billion in the prior year. Thirty analysts had a consensus revenue estimate of $16.75 billion for the quarter.

Traffic acquisition costs - the portion of revenue that Google shares with advertising partners - were $3.31 billion in the quarter, compared with $3.08 billion a year ago. Excluding this, revenues were up at $13.55 billion, compared with $11.34 billion last year.

Google's revenue from the Motorola Mobility division slid to $1.24 billion from $1.51 billion last year, while operating loss widened to $384 million from $152 million last year.

On Wednesday, Google agreed to sell Motorola Mobility to Chinese hardware company Lenovo for $2.91 billion in order to focus on Android. The move came just withing two years after Google acquired the handset division from Motorola for $12.5 billion.

Motorola Mobility has been an Achilles' heel for Google as it ran into losses for successive quarters. While the Lenovo deal ends Google's plunge into the mobile hardware devices business, the search engine giant will still hold a chunk of profitable patents at Motorola Mobility.

Earlier this month, Google agreed to acquire home automation start-up Nest Labs for $3.2 billion. Based in Palo Alto, California, Nest Labs makes sensor-driven, Wi-Fi-enabled, self-learning, programmable thermostats and smoke detectors.

Google Glass is also expected to hit store shelves this year, and the company is testing a smart contact lens that is built to measure glucose levels in tears.

In other news, a recent Reuters report said that the company and European Union regulators are about to settle a three-year antitrust probe into alleged anti-competitive behavior. The settlement is expected to help Google avoid a possible fine of as much as $5 billion.

Meanwhile, Yahoo! Inc. (YHOO) recently reported a 28 percent rise in quarterly profit, mainly on gains from equity interests even as revenues slipped on weak ad business.

But there was some good news from Facebook (FB), as the social networking site reported a surge in quarterly profit, led by strong growth in mobile ad revenue.

Google stock closed Thursday at $1,135.39, up $28.47 or 2.57%, on a volume of 4.6 million shares on the Nasdaq. In after hours, the stock gained $49.61 or 4.37% at $1,185.