* Page asks for investors trust in long term vision
* Results solid but some worry about 2nd straight slide in
search ad rates
* Q1 adjusted EPS $10.08 vs Street's $9.65
By Alexei Oreskovic
SAN FRANCISCO, April 12 Google Inc
announced a stock split designed to preserve the control of
co-founders Larry Page and Sergey Brin over the world's No. 1
Web search engine, asking investors to trust their long-term
The surprise decision, which its board unanimously approved,
came as the company exceeded Wall Street's profit expectations
but revealed a worrying 12 percent drop in search advertising
rates - the second consecutive quarterly decline.
Shares of Google, which finished Thursday's regular session
at $651.01, rose to $653 in after-hours trading.
Google's corporate structure, which gives the founders
majority voting control of the company, has been emulated by
later generations of Web sensations such as Zynga Inc
and Facebook. But the stock split goes even further by ensuring
that the founders' voting heft will not be diluted over the long
The news came just as Page completed a year in the chief
executive's seat for the second time, during which he
spearheaded the planned $12.5 billion acquisition of Motorola
Mobility and launched a social network to take on
With competition heating up in the Internet market and
gadgets such as smartphones and tablet personal computers
reshaping the technology landscape, many investors are trying to
figure out how Google's business will be affected.
Google delivered a healthy first-quarter profit, with net
income growing to $2.89 billion from $1.80 billion in the
Earnings of $10.08 per share, excluding certain items,
surpassed the $9.65 that analysts had predicted - a source of
relief to investors after a rare earnings shortfall in the
"The questions are not really the numbers around the
quarter. The questions are much more higher-level
strategically," said Macquarie Research analyst Ben Schachter.
He cited concerns around the pending acquisition of Motorola
which will put Google in the hardware business - an area it has
no experience in, with much lower profit margins than its online
Google executives did not address the Motorola deal, which
is expected to close in the first half of this year, during the
conference call with analysts on Thursday.
But Google CEO Page defended the company's philosophy of
focusing on long-term goals that can take years to pay off,
citing successful past "big bets" such as the purchase of video
site YouTube for $1.65 billion and the development of its
Android mobile software, now the world's No.1 smartphone
The best way to keep finding the big opportunities, Page
said, is to maintain the special corporate structure that gives
him and co-founder Sergey Brin 56.7 percent of the voting
"By investing in Google, you are placing an unusual long
term bet on the team, especially Sergey and me, and on our
innovative approach," Page said.
Google said its board of directors has approved a new type
of special non-voting "Class C" shares which will ensure that
Page and Brin's control doesn't get diluted as the company
issues new shares for employee compensations and acquisitions.
The dividend, in effect, works like a 2-for-1 stock split:
Investors will get one share of the new "Class C" stock for each
existing Google share. The price of Google's current "Class A"
shares will be halved when the new Class C shares are issued and
listed on Nasdaq under a separate ticker.
"I can't think of another example where a company created an
additional class of shares and issued them to existing
shareholders," said Bob McCormick, chief policy officer at Glass
Lewis, an independent proxy advisor. But he said the move simply
perpetuated a system that shareholders had agreed to when Google
went public eight years ago.
Google executives said the company continued to gain ground
with large advertisers during the first quarter, particularly
for the display ads on its YouTube site and for mobile ads.