San Francisco: Google’s profits surged more than 30% to $1.31 billion in Q1, erasing fears of sagging online advertising revenues.
Google’s stock leaped more than 17% to $526 a share in after-hours trading on the news. Google reported that overall revenues rose to $5.19 billion in the quarter and profits equaled $4.12 per share, compared to $3.18 per share in the same period last year.
“We are obviously very pleased,” Google chief executive Eric Schmidt said during a conference call with analysts and media. “It is clear to us we are well-positioned for 2008 and beyond despite the business environment we find ourselves in.”
Online ads up 20%
Revenue from Google’s main cash source, clicks on online ads, rose 20% in the quarter, mitigating worries that shifting to displaying fewer, better-targeted ads would hurt the California company.
“Google is a cash machine,” said Silicon Valley analyst Rob Enderle of Enderle Group. “The only thing that could hurt them is if, for whatever reason, the market re-looks at the value placed on eyeballs on the Web and pushes back on pricing, which is always a possibility, but is extremely remote.”
Unaffected by U.S slowdown
Schmidt was adamant that Google is not being affected by macroeconomic conditions, including the troubled business market in the United States. Slightly more than half of its reported revenues came from outside U.S borders.
Making the bulk of revenues overseas is a trend among U.S technology giants including Intel, IBM and Hewlett Packard. “That shows significant advantage for companies spread out internationally to weather a storm in the US market,” Enderle said.
“I think it reflects the fact they could weather anything other than a worldwide storm. As long as the storms remain localized they are okay.”
Google co-founder Serge Brin said during the conference call that the firm has improved Internet search pages tailored for users in Asia and other overseas markets. Merging DoubleClick’s ad-targeting technology with Google properties, especially the popular YouTube website, is “hugely strategic” for the company, according to Schmidt.
Google completed its $3.1 billion buy of DoubleClick last month. “As we integrate DoubleClick into our advertising platform, we see exciting new ways to improve the user experience and increase value for our advertisers and partners,” Schmidt said.
Google is also expanding into “cloud computing,” applications hosted on the Internet as services instead of being sold as packaged software to be installed on users’ machines.
Selling packaged software
Google’s mission takes direct aim at Microsoft, which has built its fortune on selling packaged software such as Word, Office and Outlook.
“In the applications case we are working to build out a whole new online experience,” Schmidt said, noting a fresh alliance with cloud computing pioneer Salesforce.com.