Google sales jump 18%

Internet giant earns $5.10 a share, topping estimates, despite a dreary economy. Net income drops 68% on charges.

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By Kenneth Musante, staff writer

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NEW YORK ( -- Internet advertising behemoth Google continued to show strong sales and profit against a thorny economic backdrop.

The Mountain View, Calif.-based company reported an 18% jump in fourth-quarter revenue to $5.7 billion for the period ended Dec. 31. That's up from $4.83 billion in the year-earlier quarter.

Excluding commissions paid to advertising partners, Google posted sales of $4.22 billion, better than the $4.12 billion in sales expected by analysts polled by Thomson Reuters.

Google reported fourth-quarter net income of $382 million, down 68% from $1.2 billion a year ago. However, excluding certain charges, such as the cost of employee stock options, the company earned $5.10 a share, much better than consensus estimates of $4.95 per share.

"We had tight control over costs" in the quarter, said Google chief executive Eric Schmidt in a conference call with analysts.

"We don't know how long this period will last," Schmidt said, but he added that Google remained focused on long-term growth.

Schmidt pointed to the scaling back of non-profitable Google projects such as Google Video, Google Notebook, and status update service Jaiku. He also mentioned a quarterly decline in costs paid to advertising partners.

"Google continues to take market share, and they continue to have any number of levers to pull on both the revenue and the cost side that makes them very formidable in any economic environment," said Derek Brown, analyst with brokerage Cantor Fitzgerald.

Over the last quarter of 2008, Google said it spent about $368 million on capital expenses - mostly on data centers, servers and networking equipment.

As of Dec. 31, Google said it employed 20,222 full-time workers, slightly up from the 20,123 it employed at the end of September.

In order to retain employees, Google also announced that it would be starting a stock option exchange program from the end of January through early March.

According to Schmidt, many of the current options would cost more to exercise than they are worth. The plan will allow employees to exchange old options for new, and the company will count them as stock-based compensation in the first quarter.

Google's stock has dropped 25% during the most recent quarter, and it fell off more than 56% through 2008.

Shares of Google (GOOG, Fortune 500) were trading about 1.5% higher in after-hours trading Thursday.

Cantor Fitzgerald buys and sells shares of Google. To top of page

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