UPDATE 4-Google's Q4 results shine after ad rate decline slows

Tue Jan 22, 2013 8:23pm EST

* Shares climb after-hours on strong results
    * Core revenue, costs-per-click surpass expectations
    * International markets grow, holiday season helps


    By Alexei Oreskovic
    SAN FRANCISCO, Jan 22 (Reuters) - Revenue from Google Inc's
 core Internet business outpaced many analysts'
expectations during the crucial holiday quarter and advertising
rates fell less than in previous periods, pushing its shares up
roughly 5 percent. 
    The world's largest Internet search company introduced new
product listings during the fourth quarter - typically its
strongest - and also benefited from business growth in
international markets, analysts said.
    Excluding traffic-acquisition costs, the business generated
net revenue of $9.83 billion, up from $8.13 billion a year
earlier, Google reported on Tuesday. That surpassed a $9.6
billion average forecast from six analysts polled by Reuters.
    "Business looked really strong, especially from a
profitability perspective. They really grew their margins in the
core business," said Sameet Sinha, an analyst with B. Riley
Caris. "Most of that strength seems to be coming from
international markets which grew revenues quite substantially:
up 23 percent year over year, versus the 15 percent growth in
the third quarter."
    Average cost-per-click, a critical metric that denotes the
price advertisers pay Google, declined 6 percent from a year
ago, the fifth consecutive quarter of decline but an improvement
over the third quarter's 15 percent slide.
    Google executives told analysts on a conference call that
policy changes related to the quality and quantity of ads
appearing on certain of its Web properties had helped shore-up
click prices while lowering the overall growth rate of paid
clicks in the holiday quarter. 
    "Click prices are still declining, but it's better than
expected," said BGC Partners analyst Colin Gillis. 
     The decline in Google's click prices is partly a result of
consumers' shift to smartphones, where Google's ad rates are
lower than those on Google's standard website. 
    Google cited growing demand for its spectrum of online
advertising services, including mobile ads, display ads, video
ads and its newly-launched product listings, though the company
did not provide specific financial results for the individual
businesses. 
    "More small enterprises increasing their spending
collectively on Google's various products," continues to drive
Google's growth, said Pivotal Research Group Analyst Brian
Wieser. 
    
 
    
    MOTOROLA MOBILITY "STILL LOSING MONEY"
    Investors shrugged off another quarterly loss at the
Motorola Mobility mobile phone business Google acquired last
year, one of various "big bets" that Google Chief Executive
Larry Page has made to better position the company for a
changing technology landscape defined by mobile gadgets and
social networking. 
    "We now live in a multi-screen world," said Page, adding
that "we feel naked without our smartphone."
     Page said that Google had work to do in "managing our
supply better as well as building a great customer experience,"
but said Google remains squarely focused on opportunities around
newfangled devices such as smartphones.
    Asked about the potential threat from Facebook Inc's 
recently-launched social networking search product, Page cited
Google's years of online search experience and innovations such
as voice-based search. 
    Consolidated net income in the fourth quarter was $2.89
billion or $8.62 per share, compared with $2.71 billion, or
$8.22 per share, in the year-ago period when Google had not yet
acquired Motorola.
    Excluding certain items, Google said it earned $10.65 per
share in the fourth quarter.
    "The core business is a great business and the
fourth-quarter is always a time for Google to shine. However,
Motorola is still losing money and click rates still declined.
They only declined 6 percent, but go back four or five quarters
and click prices were improving. So mobile is still pressuring
click prices," Gillis said. 
    The company posted consolidated revenue - which includes its
Motorola Mobility mobile phone business but not the television
set-top box business it recently agreed to sell - of $14.42
billion on Tuesday.
    Motorola Mobility had an operating loss of $353 million
during the quarter. 
    Google Finance Chief Patrick Pichette warned of more
fluctuations in Motorola's financial results in the coming
quarters as Google continues to restructure that business. 
    And he noted that Google was working through 12 months to 18
months of product pipeline that Google inherited in the
acquisition. 
    Google announced plans to sell the Motorola Home television
set top box business to Arris Group Inc for $2.35
billion. The company also has said it is focused on developing a
smaller line-up of products in the mobile phone business.
    Shares of Google rose roughly 5 percent to $738.20 in
after-hours trading on Tuesday.
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