Restructuring at Google
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After dismal 4th quarter earnings, Google announces plans for restructuring
and cost cutting.
In a statement after the close on Thursday, Google
Inc. (GOOG), known as the "World's Best Search Engine," confirmed reports that
the Internet giant posted quarterly profits that fell for the first time during their
4th quarter, yet still managed to come in higher than analysts' expectations.
As the economy continues to take its toll on nearly every company's bottom-line,
Google was able to curtail their cavalier spending habits in lieu of slowing online
ad marketing revenues.
"Google performed well in the 4th quarter, despite an increasingly difficult economic
environment. Search query growth was strong, revenues were up in most verticals, and
we successfully contained costs," announced Eric Schmidt, Chief Executive Officer of
Google.
For the recent period, Google recorded net income of $382M, or $1.21 per share, in
contrast to last year's earnings during the 4th quarter of $1.2B, or $3.79 per share,
equating to a decrease in net earnings of 68%.
Excluding expenses, charges, and other one-time items, Google would have posted net
income of $1.6B, or $5.10 per share, versus last year's tally of $1.4B, or $4.43 per
share. A majority of those expenses were directly related to a write-down of $1.5B on
investments in two floundering companies, AOL and
Clearwire Corporation.
Looking further into the company report, gross sales surged more than 18%, climbing
from $4.83B to $5.7B. On average, analysts were anticipating the company to post
earnings of $4.95 per share on overall revenues of $4.12B.
Related to Google's sales figures, revenues generated from company-owned sites
increased 22% year-over-year to amount to $3.81B, which equates to nearly two-thirds
of the company's total revenue. As for sales from their partner sites, which are run
through AdSense programs, Google posted revenues of $1.69B, or 30% of total sales.
Having backed out of its web advertising deal with Internet rival Yahoo! Inc. (YHOO)
back in November, the company has been able to launch new products since then to help
offset lost revenues from the proposed arrangement.
Included in the new releases is the company's own web browser named Google Chrome,
which was developed to take on rival Internet giant
Microsoft's (MSFT) Internet Explorer.
In order for the company to reduce spending amidst a weakening economy, Google has
also proclaimed that they are in the process of eliminating certain products and
services that are not meeting company expectations, such as Print Ads, which did not
produce the return the company was hoping for.
Furthermore, Google also added that the company would reduce the overall size of
their recruiting division by nearly 100 positions, in efforts to combat the battered
economic environment.
Looking ahead to the upcoming fiscal 2009, Schmidt went on to add, "It's unclear how
long the global downturn will last, but our focus remains on the long term, and we'll
continue to invest in Google's core search and ads business as well as in strategic
growth areas such as display, mobile, and enterprise."
After trading lower before the company's quarterly release on Thursday, shares of
GOOG were up during Friday's session, adding $17, or 5.5%, to trade at $323.50 per
share. Over the past year, shares of Google have lost more than 44% of its value,
trading in a range between $247 and $602 per share.
Google shares reached an all-time high of $747.24 back in November 2007.
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