Google quarterly results fail to excite

SAN FRANCISCO (Reuters) - Google Inc's quarterly profit beat Wall Street expectations, but its revenue growth was not as stellar as some investors had hoped, sending shares down nearly 3 percent on Thursday.

While the Web search leader's revenue growth of 3 percent slightly exceeded the average forecast, expectations for a bigger beat had been built into Google's stock after Intel Corp's strong report earlier this week.

"The whisper number for revenue growth was probably much higher and they came in a little lower," said JMP Securities analyst Sameet Sinha.

Excluding special items, Google earned $5.36 a share in the second quarter, ahead of the $5.08 per share expected by analysts, according to Reuters Estimates.

Ross Sandler, analyst at RBC Capital Markets, also said Google's earnings per share were helped by a low tax rate.

Revenue totaled $5.52 billion, compared with $5.37 billion a year earlier and the average analyst view of $5.49 billion.

Analysts say Google's search-based advertising model is still the best in the business, but it has never been tested to this degree. It faces a slump in advertising spending due to the weak economy, and a resurgent rival in Microsoft Inc, whose Bing search engine has won early favor.

"In my opinion, Google is gaining market share," said Sinha. "It definitely shows that Google is a best-of-breed company for online advertising, and it's a must buy."

Google Chief Executive Eric Schmidt said on a conference call on Thursday that business appears to have stabilized, but it was "too early to tell" when economic recovery will materialize -- echoing his recent comments on the subject.

Google posted net income of $1.48 billion, or $4.66 a share, compared to $1.25 billion, or $3.92 a share, in the year-ago period.

Shares of Google fell to $430 in after-hours trade on Thursday, from their Nasdaq close of $442.60. The stock had risen about 9 percent in the past three months, compared with a 3 percent increase in the Dow Jones industrial average.

As usual, the company did not provide a financial outlook.

Google said the number of clicks on the ads that run alongside its search results, dubbed paid clicks, increased 15 percent year-over-year in the second quarter, a slight deceleration from the 17 percent clip in the first quarter.

The Mountain View, California, company also said that the cost per click decreased roughly 13 percent year-over-year, but increased 5 percent from the previous quarter.

"It doesn't seem like things are turning around per se. But the revenue per click -- an indication of advertisers' appetite for clicks and for advertising -- was up sequentially, so you can assume that in terms of ad budgets out there, we probably reached a bottom some time in the first quarter," said Richard Fetyko, managing director of Merriman Curhan Ford.

"What we need now is rebound in consumer spending."

(Additional reporting by Anupreeta Das and Laura Isensee; Editing by Steve Orlofsky and Tiffany Wu)