* Ad rate decline slows again
* Q1 consolidated revenue $13.97 bln
* Shares up 1.5 percent
By Alexei Oreskovic
April 18 Google Inc's core Internet
business grew net revenue 23 percent in the first quarter,
softening the effect of a sharp decline in its Motorola mobile
Shares of Google, which reached an all-time high of $844 in
March, were up 1.5 percent to $777.75 in after hours trading on
"Google eked out an acceptable quarter, but it wasn't easy,"
said Stifel Nicolaus analyst Jordan Rohan.
Google's core search advertising business remains solid but
unexciting, Rohan said.
He noted that Google's adjusted profit of $11.58 per share
benefited from a significantly lower tax rate due to a
retroactive research and development tax credit. Without that
benefit, Rohan said Google would have missed Wall Street's
earnings target of $10.66 per share.
The world's No.1 Internet search engine, Google has stepped
up efforts to adapt its business to a rapidly changing
technology landscape in which consumers are increasingly
accessing the Web using mobile devices instead of PCs.
The company's Android operating system has leaped past Apple
Inc's iPhone and its iOS software to become the most
popular smartphone software, used on more than 70 percent of
devices, according to industry research firm Gartner.
Google improved its cost-per-click, a critical metric that
refers to the price advertisers pay the Internet search giant,
in the first quarter. The CPC rate declined 4 percent
year-on-year in the first quarter, versus a 6 percent decline in
the fourth quarter.
"It's classic Google. There's plenty of things to like and
some things not to like," said BGC Partners analyst Colin
NEW PRODUCTS KEY TO FUTURE
Google CEO Larry Page spent much of the conference call
discussing new products such as the Google Glass wearable
computers and high-speed fiber networks that the company is
developing, which he said were vital to the company's future
"If you look at most companies they never do anything
different, and eventually they run into problems for that
reason," said the 40-year-old Page, who co-founded Google in
1998 with Sergey Brin.
He said the new lineup of yet-to-be-released Motorola
devices would offer a variety of improvements over current
smartphones, with features such as longer battery life and
better resistance to shattering or damage from spilled drinks.
For now however, the Motorola business continues to be a
drag on Google's consolidated results, said Gillis of BGC
Revenue at the Motorola business, which Google acquired for
$12.5 billion in May 2012, declined to $1.02 billion in the
first three months of the year, from $1.51 billion in the fourth
quarter. The Motorola business posted an operating loss of $271
million in the first quarter.
Google's main Internet business generated $9.99 billion in
first-quarter net revenue, which excludes fees paid to partner
websites, compared to $8.14 billion in the first quarter of
Seven analysts polled by Reuters had yielded an average
forecast of $9.78 billion.
"There was nothing exceptional about the top line. But I
think CPC rates are again incrementally a little bit better,"
said Needham & Co analyst Kerry Rice, referring to Google's cost
per click rates.
Google's search ad rates have been under pressure as more
consumers access its online services on mobile devices such as
smartphones and tablets, where advertising rates are lower than
In February, Google changed the way marketers run ad
campaigns on Google, blurring the distinction between ads
destined for PCs and mobile ads, in a move that some analysts
believe could help bolster Google's overall ad prices.
Google also recently converted its shopping search feature
to an all-advertising based system, in which retailers are
required to buy ads featuring photos of their products in order
to be included in the search results. More than one billion
products are now listed, Google Chief Business Officer Nikesh
Arora said during the conference call.
Overall first quarter net income, including its money-losing
Motorola Mobility mobile phone business, was $3.35 billion or
$9.94 per share. That compares with net income of $2.89 billion
or $8.75 per share in the year-ago period, before Google
Consolidated revenue in the first quarter was $13.97
billion, versus $10.65 billion in the year-ago period.