Google doubles year-over-year profit

In first report as a public company, search giant posts third-quarter profit of $52 million, thanks to booming online ad revenue.

Reporting for the first time as a publicly traded company, Google recorded a third-quarter profit of $52 million that more than doubled on booming online advertising revenue.

The Web search company, based in Mountain View, Calif., posted net income of $52 million, or 19 cents a share. That compares with net income of $20.4 million, or 8 cents a share, in the comparable period in 2003.

Revenue in the third quarter was $805.9 million, up 105 percent from the $394 million reported for the third quarter of 2003. Revenue was up 15 percent sequentially from the second quarter.

Excluding a one-time charge of $201 million from a patent dispute settlement with rival Yahoo, Google reported net income of $125 million, or 45 cents per share, on a diluted basis. The charge was offset by associated and pre-IPO tax benefits.

"We told investors from the start that Google is an unconventional company," Google CEO Eric Schmidt said on an investor conference call. Schmidt added that Google had said it would build its business based on a long-term vision of financial success. The company, however, is also "very pleased with our revenue on the short run," Schmidt said.

Schmidt added that he would not give future guidance.

Google's shares closed up 6 percent to $149 on the Nasdaq stock exchange. In after-hours trading, shares were trading as high as $161, according to Island ECN.

Google attributed the better-than-expected profit and revenue growth to surging traffic on its Web site and partner sites, more advertisers and more "clicks" on the text ads that accompany search results.

Even a seasonal downturn was muted this year as a result, Google CFO George Reyes said.

"We've seen improvements from advertising--sometimes it's better click-through rates (from targeting), sometimes it's more advertisers, sometimes it's from international growth," Schmidt said.

At the end of the quarter, Google reported that it had $1.86 billion in cash, cash equivalents and short-term investments. As of Sept. 30, Google employed 2,668 full-time staff globally, up from 2,292 in June.

On the question of stock-option grants, Reyes said Google would be "lean and judicious" about its employee equity rewards.

Google reported that so-called traffic acquisition costs, or costs to acquire new distribution partners for its advertisements, rose to $302.9 million in the third quarter, comprising 79 percent of revenue in the Google network. That compares with $143.5 million in the third quarter of 2003, when such fees comprised 82 percent of revenue.

Traffic acquisition costs equate to the fees that Google pays partners, such as newly acquired partnership with AOL Europe, when it splits off advertising revenue from pay-per-click ads.

Still, revenue from partnerships with America Online, EarthLink and many others was $384.3 million in the third quarter, an increase of 120 percent in the comparable period a year ago. That revenue comprises 48 percent of Google's total sales.

Revenue from Google's site generated $411.7 million in the third quarter, or 51 percent of total revenue. That number increased 99 percent from the third quarter of 2003.

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