(Bloomberg) -- Google Inc., owner of the world’s most popular search engine, reported an 8.9 percent increase in first-quarter profit after cutting jobs and jettisoning some businesses. Sales growth slowed as demand ebbed for online ads.
Net income climbed to $1.42 billion, or $4.49 a share, the company said today. Excluding revenue passed on to partner sites, sales were $4.07 billion last quarter, compared with the average analyst estimate of $4.1 billion in a Bloomberg survey.
Customers scaled back ad campaigns last quarter, leading to the first sequential drop in quarterly sales since the company went public in 2004. Google is now reining in research and marketing expenses to maintain profit growth. It has eliminated sales jobs and shut down its newspaper and radio ad units.
“We’re still basically in uncharted territory,” Chief Executive Officer Eric Schmidt said on a conference call. “The current economic environment, which everybody is all very, very familiar with, remains tough.”
Google, based in Mountain View, California, climbed as high as 6 percent in extended trading after the earnings report was released. The shares then drifted back down during the conference call. Google’s stock has climbed 26 percent this year in Nasdaq Stock Market trading.
Conference Call
The downbeat tone of the call may have changed investor sentiment, said Richard Fetyko, an analyst with Merriman Curhan Ford & Co. in New York. He recommends buying the shares. “They were talking things down,” he said.
Excluding costs such as stock-based compensation, earnings were $5.16 a share, compared with the $4.95 estimated by analysts. Net income was $1.31 billion, or $4.12 a share, a year earlier. While sales rose 6.2 percent, Google’s total expenses were little changed from last year, at $3.63 billion.
Revenue from outside the U.S. made up 52 percent of total sales, up from 50 percent in the fourth quarter.
The company also announced that its head of global sales, Omid Kordestani, will become a senior adviser to Chief Executive Officer Eric Schmidt and Google’s founders. Nikesh Arora will take over Kordestani’s old job.
U.S. online advertising spending growth will slow to 4.5 percent this year, according to New York-based research firm EMarketer Inc. That’s down from 10 percent in 2008.
Internet Searches
Still, the ad market might have stabilized in March, said Marianne Wolk, an analyst with Susquehanna International Group LLLP. The number of online searches surged 9 percent in March over February, according to ComScore Inc. of Reston, Virginia.
Google, which gets almost all its sales from online searches, handled 64 percent of U.S. queries in March, according to ComScore. Yahoo! Inc. was No. 2 with 21 percent, and Microsoft Corp. had 8.3 percent.
Google is seeking to expand beyond search-based text ads, which provide its biggest chunk of revenue. The company acquired DoubleClick last year to extend its reach into display advertising, including banner ads.
Google said last month that it was testing new kinds of ads on its YouTube video service and partner sites. The ads target users based on the types of sites they visit and their interests, rather than just what they’re searching for.
After hiring for years, Google slimmed down last quarter. The company said last month it would eliminate about 200 jobs in sales and marketing, about 1 percent of its workforce.
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