Google Smashes Earnings, Major Management Changes (GOOG)

January 20, 2011 by Jon C. Ogg

Internet search giant Google Inc. (NASDAQ: GOOG) reported earnings after the close on Thursday of $2.98 billion from operations at $7.81 net but at $8.75 EPS on an adjusted basis and $6.37 billion in revenues.  Keep in mind that this is an ex-Traffic Acquisition Cost revenue figure, which is what the estimates are based upon.  The adjusted earnings was also the figure analysts will focus on.  Thomson Reuters had estimates of $8.09 EPS and $6.06 billion in revenues.

The big news is the management changes.  Larry Page, Google’s Co-Founder, will take charge of daily operations as Chief Executive Officer of Google; Co-founder Sergey Brin will devote his energy to strategic projects, which are noted as working on new products; Eric Schmidt will become the Executive Chairman and will focus externally on deals, partnerships, customers and broader issues and will continue to act as an advisor to Larry and Sergey.

If you include TAC, revenues were up 26% to $8.44 billion.  Google Sites revenues from its own websites generated 67% of revenues at $5.67 billion, a 28% increase over fourth quarter 2009 revenues of $4.42 billion.  Google Network revenues from partner sites and AdSense programs rose 22% to $2.50 billion, which is 30% of total revenues.  International revenues were 52% of total revenues at $4.38 billion, compared to 52% in the third quarter of 2010 and 53% in the fourth quarter of 2009.

Net cash provided by operating activities in the fourth quarter of 2010 totaled $3.53 billion, compared to $2.73 billion in the fourth quarter of 2009. The web giant ended the quarter with $35.0 billion in cash and equivalents.  Google listed its total headcount was 24,400 full-time employees as of December 31, 2010, up from 23,331 full-time employees as of September 30, 2010.

Shares closed down 0.8% at $626.77 on the day.  The after-hours reaction might have been better had the management changes not been announced.  The after-hours reaction has seen some confusion but so far we are seeing shares trade up around $634.00 in the after-hours.  The 52-week trading range is $433.63 to $642.96.

JON C. OGG