UPDATE 1-RESEARCH ALERT-Lehman cuts Google price target to $580

Thu Mar 27, 2008 9:21am EDT

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March 27 (Reuters) - Lehman Brothers cut its share price target on Google Inc (GOOG.O) by 10 percent to $580 and lowered its first-quarter and 2008 earnings estimates for the Web search company, saying the slowing economy could affect "paid clicks" and advertising budgets.

Web measurement firm comScore Inc reported on Wednesday that Google's "paid clicks" -- a key measure of how Web searchers are converted into ad viewers -- grew by a modest 3.1 percent year-to-year in February.

"We do not believe Google's first-quarter results will be as soft as comScore data suggests, but we also cannot ignore a second straight month (perhaps third if including December) of weak domestic paid click data," analyst Douglas Anmuth said in a note, maintaining his "overweight" rating on the stock.

"We believe there has been some macro-driven softness in specific categories such as real estate and financials, particularly early in the quarter, but we continue to believe the overall search industry remains reasonably healthy," he said.

Google's enhanced quality initiatives and a slowdown in overall search traffic are also impacting the company, the analyst said.

Anmuth said his "overweight" rating was based on solid secular trends, Google's share gains and the belief that current quality initiatives will prove beneficial over time.

Google shares fell 3 percent to $443.20 in trading before the bell, after closing at $458.19 Wednesday on Nasdaq. (Reporting by Jennifer Robin Raj in Bangalore; Editing by Vinu Pilakkott)

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