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Google Makes Huge Comeback In 1Q

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Google Inc.’s first-quarter financials bounced back considerably from a disappointing January 31st fourth-quarter report that sent stock prices into a tailspin. At the closing bell Thursday, Google reported a profit increase of 60 percent, returning to its usual flogging of analyst estimates.

Google raked in a net income of $592.3 million, or $1.95 per share, up from $369.2 million and $1.29 per share from a year ago. Revenue skyrocketed for the quarter ending March 31st, rising 79% to $2.25 billion. Take out affiliate websites, that leaves Google with net revenue of $1.53 billion, crushing the leading $1.44 billion analyst projections.

“Google had an exceptional quarter with strong growth and profitability, from both Google properties and the network,” said Eric Schmidt, CEO of Google.

“We are driving this growth through investments in our infrastructure and our people, product innovations that attract new users, and relationships with advertisers and partners around the world. The strength of our business model gives us the opportunity to invest in our business, allowing us to maintain and grow our market leadership.”

Google also crushed analyst predictions in terms of profit. Excluding stock-based compensation costs, the search giant delivered $2.29 a share, 32 cents above analyst forecasts.

At the closing bell, Google shares rose $4.50 to $415, still well below the record $475 stock price recorded before their disappointing fourth-quarter report. Thirty-one out of 38 analysts currently have GOOG rated as “buy.”

Google’s successful quarter is no doubt affected by a recent swell in Internet advertising. According to a report issued by the Interactive Advertising Bureau and PricewaterhouseCoopers LLP, online ad spending rose 30% to $12.5 billion in 2005.

That surge continued in the first quarter 2006, as search advertising spending rose 34% over a year ago to $5.14 billion. As reflected in a recent comScore report, Google’s share of that rising market is increasing, as the Mountain View, Calif.-based company controls nearly 43% of all searches. Yahoo and MSN, by contrast, have slipped in market share, holding only 28% and 13% respectively.

According to Fortune’s Adam Lashinsky, Google is on pace to earn $3.7 billion on sales of $9.5 billion, or about nine times the profit and three times the revenues it had in 2004.

“In 2006 alone,” writes Lashinsky, “Google has traded as high as $475 and as low as $331, a swing of $43 billion in market value, or nearly what McDonald’s is worth.”

Google Makes Huge Comeback In 1Q
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