Google, When Good Isn't Enough (GOOG)

Google Inc. (NASDAQ: GOOG) delivered its earnings after the close, and earnings season for tech and internet companies may have just taken a turn (not for the better).  The company reported earnings at $6.76 EPS on an adjusted basis and said revenues (ex-TAC) were $5.045 billion; Thomson Reuters had estimates of $6.60 EPS on $4.95 billion (ne earnings was $6.06 EPS per headline data).  We have gone through Google’s  press release on earnings to highlight some of its finer points, and we also compared those metrics to the results last quarter as well.  There are no huge surprises in here, but there are some issues that Google will have to explain and that are not going to help its case of dominating everything endlessly on the web.

First and foremost we did note that China was less of an impact in the last quarter as it will be ahead, Android is out and adding to revenues.  On the flip side, it was hard to not notice CPMs in February being weaker than in January and March (see below in TAC, publishers and content owners will be complaining tomorrow), and it was also hard to ignore that Google’s Hitwise market shares reading for March was under 70% for the first time since 2008.  Here are the other metrics:

• Google-owned sites generated revenues of $4.44 billion, or 66% of total revenues; that is the same percentage as last quarter.
• Google’s partner sites generated revenues, through AdSense programs, of $2.04 billion, or 30% of total revenues, in the first quarter of 2010; that was 31% one quarter ago;
• International revenues, ex-U.S., was 53% of total revenues, same as one quarter ago;
• TAC, Traffic Acquisition Costs as the amount of revenues shared with partners as a percentage of advertising revenues was 26% in the first quarter versus 27% a quarter ago and the quarter a year ago.
• Paid clicks increased approximately 15% over the first quarter of 2009 and increased approximately 5% over the fourth quarter of 2009.
• Operating expenses (other than cost of revenues) were 27% of revenues, same as a quarter ago;
• Stock-Based Compensation was $291 million versus $276 million last quarter; Google still expects that figure for 2010 to be about $1.2 billion;
• Cash, cash equivalents, and short-term marketable securities came to $26.5 billion, up from $24.5 billion last quarter.
• Google employed 20,621, up much more on a relative basis from a quarter ago when it had 19,835 full-time employees and had only added about 170 heads.

Google closed up 1.07% at $595.30 as an unofficial closing bell price and its 52-week trading range is $364.16 to $629.51.  The after-hours reaction has shares trading down around $576.00 in active trading.

JON C. OGG