Google's killer app: Cost-cutting

(breakingviews.com) -- Google found a killer app in the second quarter: cost-cutting.

Revenue at the search giant has stagnated amid the downturn. Yet the company has found a way to deal with this dilemma. It is trimming expenses and reducing its focus on wacky ideas. It's not rocket science, but it's a sign Google is accepting its increasing maturity.

Revenues only rose 3% when compared with the second quarter last year. Moreover, they were more or less unchanged from the first three months of the year. Yet Google managed to boost its profits despite the tough environment. Earnings were up 19% compared with last year's second quarter.

The reason is simple - the firm exercised financial discipline. It ended the quarter with fewer employees and lower expenses overall. Perks such as bottled water have been cut. And capital expenditure was reduced by 80%, resulting in more cash piling into the company's treasure chest.

It's all a far cry from Google's boom-time try-anything, venture-capitalist image, but investors should welcome it. The focus on the bottom-line may not be sexy, but among technology companies at large it has made the difference this earnings season between winners such as Intel (INTC, Fortune 500) and losers like Nokia (NOK).

And if this march toward corporate maturity continues, Google (GOOG, Fortune 500) might even start thinking about rewarding shareholders with a dividend from its $19 billion cash pile.