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Google's Profit Up Sevenfold

The Internet giant's explosive growth boosts its stock to a new high in after-hours trading.

October 21, 2005|Julie Tamaki | Times Staff Writer

Google Inc. on Thursday reported a sevenfold jump in third-quarter profit, bumping its shares to record levels as the Internet powerhouse showed no signs of slowing its explosive growth.

The search giant earned $381.2 million, or $1.32 a share, up from $52 million, or 19 cents, in the same quarter last year.

Revenue, virtually all of it from online ads, nearly doubled to $1.58 billion

Excluding one-time charges -- including a $201-million legal settlement with rival Yahoo Inc. -- Google said it would have earned $1.51 a share. On that basis the company blew past the consensus estimate of $1.36 a share, according to a survey of 31 analysts by Thomson Financial.

Google shares closed down $5.50 at $303.20, but later reached a record $335.75 in trading after the release of earnings.

That prompted one analyst to conclude that Mountain View, Calif.-based Google was growing more than twice as fast and with higher operating margins than rivals EBay Inc. and Yahoo.

"They are clearly riding a rocket ship right now," said Derek Brown, an analyst with Pacific Growth Equities who owns Google shares. "It's obviously phenomenal and on some level unprecedented."

Google executives had warned of a possible slowdown during the quarter, cautioning that consumers typically spend the summer months basking in the sun rather than tapping the company's search engine. But new products such as instant messaging helped quash those concerns, as did the expansion of the company's global advertiser base and partner network.

About 56%, or $885 million, in revenue came from Google-owned sites. About 43%, or $675 million, was generated on Google's partner sites.

Chief Executive Eric Schmidt said Google's ability to maintain its momentum during a traditionally slow season demonstrated that the company was "effectively connecting with users and customers."

He said the company, which added 806 employees during the quarter, still had plenty of room to grow. "This is a very, very, very big space that we are in," Schmidt said.

David Edwards, an analyst with American Technology Research, said he did not know whether Google's new hires, which increased the company's head count by about 20% to 4,989, would help it face perhaps its greatest challenge: perpetuating its previous successes.

"The number of heads has a lot to do with product development and generating new ideas," Edwards said. "But only some of those products actually generate revenue directly."

Added analyst Brown: "It's a challenge to keep doing this as well as they've been doing it."

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