* Google Q1 results due after Thursday market close
* Analysts see net revenue up 25 pct year-year, flat qtr-qtr
* Questions about cash after Apple dividend/buyback
By Alexei Oreskovic
SAN FRANCISCO, April 10 Google Inc's
advertising rates will get extra scrutiny as Wall Street ponders
whether the proliferation of Internet-connected smartphones
helps or hinders the money-making search engine that drives the
Google's first-quarter financial results, due after
Thursday's market close, will mark co-founder Larry Page's first
year back in the chief executive's seat.
Page has moved aggressively to reposition the Web search
leader in a shifting landscape where mobile gadgets and online
social networking services are constantly vying for consumers.
For a company like Google, being on top of the latest tech
trends and capturing users' attention is crucial.
"The new CEO continues to put his thumbprint on the company
and I think that a lot of the discussion is going to be on what
the strategy is going forward," said Michael Yoshikami, fund
manager for Destination Wealth Management.
"In this space, things are moving so fast, if you do the
wrong things, in five or 10 years ... you can become
Google stunned Wall Street last quarter with a rare miss of
analysts' profit and revenue expectations, sending its stock
spiraling more than 9 percent.
Investors were particularly spooked by a surprise decline in
Google's average cost-per-click (CPC) - the money paid by
marketers for search ads - which raised fears that lower-cost
mobile search ads were to blame.
Google cited several reasons for the decline, including
changes to its advertising formats, and many analysts expect
another drop in the first quarter. But investors will be looking
for any details about the overall direction of mobile search ad
"If they come out and say that mobile CPCs have moved up
significantly since 2011 then we could see the stock run,
because that means that even if this quarter comes in-line, you
could see numbers move up for the entire year," said Sameet
Sinha, an analyst with B. Riley & Co.
Meanwhile, some analysts and investors note that so long as
mobile ads are supplemental to its desktop personal computer
search ads, Google will benefit.
Wall Street has relatively muted expectations for Google's
first-quarter results. Analysts polled by Thomson Reuters
I/B/E/S expect net revenue, which excludes fees paid to partner
websites, of $8.14 billion, up 25 percent year-over-year and
flat from the fourth quarter. Analysts are looking for adjusted
earnings per share of $9.65.
"The market right now is so greedy for good news, they're
going to have to probably meet or beat" both revenue and profit
margin expectations, said Yoshikami of Destination Wealth
"If they have a growth in revenue and reduced margins, the
stock will sell off," he said.
Google's swelling cash coffers will also be in the
spotlight, following Apple Inc's decision to issue a
dividend and begin a stock buyback program, and Facebook's $1
billion acquisition on Monday of Instagram, a popular
photo-sharing app for smarpthones.
Google had $44.6 billion in cash and marketable securities
at the end of 2011, the fourth largest cash pile among U.S.
non-financial companies according to Moody's Investors Service.
"Investors deserve to know more about what Google is going
to do with its cash other than spend $9 billion on Motorola
Mobility," said Stifel Nicolaus analyst Jordan Rohan. Google
announced plans last year to buy Motorola Mobility Inc ,
which has roughly $3.45 billion in cash on its balance sheet,
for $12.5 billion.
Google shares, which finished Tuesday at $626.86, are up 5.7
percent since Page became CEO in early April 2011, compared to
the Nasdaq composite index's roughly 7 percent increase over the
The Motorola acquisition is among Page's many big moves
since his return. He has cut back on extraneous projects and
launched a full-fledged social networking service, Google+, to
compete head-on with Facebook.
New projects, such as Google's augmented reality glasses
whose prototypes were unveiled last week, reflect a commitment
to creating ambitious products that can generate the kind of
consumer buzz typically associated with rival Apple.
Google hired aggressively in 2011 - boosting its headcount
from roughly 24,400 to more than 32,000 - but the pace seems to
be slowing. Job postings for Google have shown a "material
deceleration" in the first quarter from the last few months of
2011, according to a report by Bernstein Research analyst Carlos
The hiring slowdown could signal that Google's profit
margins, adjusted for the Motorola acquisition, will either hold
steady or expand slightly during the year, according to
Colin Sebastian, an analyst with Robert W. Baird & Co, also
sees margins stabilizing by year's end, but noted that Page's
penchant for long-term bets means the company's overall spending
remains unpredictable. And it means that investors may need to
be patient before Page's accomplishments begin to pay off.
"Considering the fact that most of what he's working on is
very long-term in nature, I'd say Wall Street is still trying to
determine what grade to give him," Sebastian said.