Google Profit Misses Estimate As Online Ad Rates Falter

(RTTNews) - Google Inc (GOOG, GOOGL) on Thursday reported a higher fourth-quarter profit, driven by a 15 percent increase in revenues and one-time gains from the sale of Motorola Mobile business, somewhat offset by stock-based compensation expense and other costs.

Nevertheless, Google's earnings and revenues fell short of Wall Street estimates, hurt by lower online ad prices and unfavorable foreign exchange rates. Google stock is up 0.60 percent on the Nasdaq.

Google has been grappling with falling ad prices, even as paid clicks gain momentum. During the quarter, Google's aggregate paid clicks increased about 14 percent from a year ago and about 11 percent sequentially.

Meanwhile, average cost-per-click fell about 3 percent, both on a year-over-year and sequential basis. The traditional desktop search business has been under pressure and mobile ads have not been very remunerative.

That apart, Yahoo has been innocuously making inroads in the search business. In December, Yahoo achieved its highest U.S. search share for over five years, after Mozilla made Yahoo the default search engine for Firefox 34 users.

Yahoo has been investing in newer ad businesses like mobile, social and video to offset the weakness in display business and is also reported to be in an impending renegotiation of a mobile search deal with Apple.

Google, based in Mountain View, California, posted fourth-quarter net earnings of $4.76 billion or $6.91 per share compared with $3.38 billion or $4.95 per share last year.

Results for the recent quarter included stock-based compensation expense of $1.19 billion, and gains from discontinued operations of $967 million, mainly related to the sale of Motorola Mobile business. The prior-year quarter included stock-based compensation expense of $902 million, and loss from discontinued operations of $506 million.

Excluding items, adjusted earnings for the quarter were $6.88 per share compared with $6.70 per share a year ago.

On average, 43 analysts polled by Thomson Reuters estimated earnings of $7.11 per share for the quarter. Analysts' estimates typically exclude special items.

Google's fourth-quarter total revenues were up 15 percent at $18.1 billion compared with $15.7 billion in the prior year.

Thirty-two analysts had a consensus revenue estimate of $18.46 billion for the quarter.

Traffic acquisition costs for the quarter totaled $3.62 billion, excluding which, revenues were $14.48 billion.

Revenue from Google owned sites climbed 18 percent from a year ago to $12.43 billion, and revenues from partner sites rose 6 percent to $3.72 billion. Other revenues rose 19 percent to $1.95 billion.

Margins were under pressure, with operating margin for the quarter slipping to 24 percent from 28 percent in the prior year.

Earlier this month, Google said it plans to launch a modular smartphone this year in Puerto Rico as part of a pilot program. The program envisages a modular phone that would enable a user to to swap components, as against the mostly prevailing practice of disposing off a phone for a new one.

On Tuesday, Yahoo reported a decline in fourth-quarter profit, hurt by a drop in ad revenues with its search business flat. However, its earnings topped Wall Street estimates, even as revenue fell shy of expectations.

GOOGL closed Thursday at $513.23, up $0.80 or 0.16%, on a volume of 3 million shares. In after-hours trade, the stock gained $0.12 or 0.60% at $513.83.