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Google grows, shares climb



Published: Sat, October 21, 2006 @ 12:00 a.m.



One analyst expects Google's shares to reach 600 soon.

SAN FRANCISCO (AP) -- Google Inc. shares climbed 8 percent Friday, a day after reporting its earnings nearly doubled in the third quarter and handily beat Wall Street estimates.

Its shares climbed 33.61 to 459.67 in trading on the Nasdaq Stock Market.

"I am pretty amazed," Google Chief Executive Eric Schmidt said. "I did not expect us to do as well as we did."

The stock price rise added about 10 billion to its market value. That's enough wealth to finance another six deals similar to Google's recently announced plans to buy the Web's hottest video service, YouTube Inc.

The stock price now appears poised to reach its highest levels since January, when it peaked at 475.11.

Widening advantage

Besides reminding investors of Google's moneymaking prowess, the third-quarter performance underscored the Mountain View-based company's widening advantage over its main Internet rivals.

Yahoo Inc., which runs the Internet's second-largest advertising network behind Google, has been hurt by slowing revenue growth most of this year -- a problem that contributed to a 38 percent drop in its third-quarter profit.

"The difference between Google and the second- and third-place players has become enormous," Global Equities Research analyst Trip Chowdhry said. "This definitely shows that Google is going to own the next generation of the computing environment."

Chowdhry believes it won't be long before Google shares hit 600 -- a target first established at the beginning of the year by Piper & amp; Jaffray Safa Rashtchy.

No matter the industry, few companies have ever matched Google's remarkable run of growth in the eight years since co-founders Larry Page and Sergey Brin launched their quirky business in a Silicon Valley garage -- part of a house that Google recently bought as a keepsake.

Most companies find it increasingly difficult to sustain their growth pace as they grow larger, but Google so far has been able to defy conventional thinking.

The third quarter, for instance, is supposed to be the most sluggish season for Internet companies because the summer tends to lure more people away from their computers. That tendency means Google should have fewer opportunities for its search engine to display the short text-based ads that account for most of its profits.

Google instead fared even better in the summer than in the winter, both in total profit and growth rates.

Earnings

The company earned 733.4 million, or 2.36 per share, for the three months ended in September. That represented a 92 percent increase from net income of 381.2 million, or 1.32 per share, at the same time last year.

Back in the first quarter, Google's profit rose by a more pedestrian 60 percent from last year.

If not for expenses to cover employee stock compensation, Google said it would have earned 2.62 per share in the third quarter-- well above the average estimate of 2.42 per share among analysts surveyed by Thomson Financial.

Revenue for the period totaled 2.69 billion, a 70 percent increase from 1.58 billion last year.

After subtracting the commissions paid to Google's ad partners, revenue fell to 1.86 billion. That figure also topped analyst estimates by about 50 million.

Surpassing Wall Street's lofty expectations is nothing new for Google, which now has blown past analysts' projections in all but one of the nine quarters since its much-ballyhooed initial public offering of stock in August 2004.

Search engine success

Google's success so far has hinged on its search engine, a piece of revolutionary technology that continues to attract new users.

In September, Google held a 45 percent share of the U.S. search market, up from 44 percent in August, according to comScore Media Metrix. Yahoo's search share dipped to 28 percent in September, down from 29 percent the previous month while Microsoft Corp.'s share continued to hover around 12 percent, Media Metrix said.




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