April 17 (Bloomberg) -- Google Inc., owner of the most popular search engine, reported a 30 percent increase in first- quarter profit after international expansion countered a slowdown in U.S. advertising spending. The shares jumped 18 percent.
Profit beat Wall Street estimates by more than 30 cents a share, excluding costs from stock options. Analysts had used industry data that showed slowing growth in the number of clicks on Web advertisements to predict a slump in revenue in the U.S. Instead, the growth in clicks ``remains healthy,'' finance chief George Reyes said, and international sales jumped 55 percent.
``I was expecting them to fall short,'' said Jerome Dodson, a portfolio manager at Parnassus Investments in San Francisco. ``People said, `Google can't keep defying the laws of gravity,' but it looks like Google is flying high again.''
Google, down 35 percent this year amid concern that slower spending by U.S. financial and consumer companies would stifle growth, climbed $79.21 to $528.75 in extended trading after closing at $449.54 on the Nasdaq Stock Market.
Net income rose to $1.31 billion, or $4.12 a share, from $1 billion, or $3.18, a year earlier, the Mountain View, California-based company said today in a statement. Sales, excluding revenue passed on to partner sites, climbed 46 percent to $3.7 billion, beating the average estimate of $3.59 billion in a Bloomberg survey of analysts.
Analysts had predicted net income of $3.96 a share, according to the Bloomberg survey. Excluding costs from stock options, profit was $4.84, topping analysts' average estimate of $4.52.
Currency Boost
A rise in the value of overseas currencies helped boost international sales. Without the change in currency rates, revenue would have been $202 million lower, Google said.
``I don't think that kind of foreign currency benefit was expected,'' said Jane Snorek, who helps manage more than $70 billion in assets at First American Funds in Minneapolis.
Google captured 63 percent of Internet queries worldwide in February, up from 62 percent in December, according to Reston, Virginia-based ComScore Inc. Google accounted for 60 percent of U.S. searches in March.
Turning Point
For the first time, Google got most of its sales from outside the U.S.
``This is the quarter where we're now 51 percent international, and I don't think that number is going to go down,'' Chief Executive Officer Eric Schmidt said on a conference call. Google is seeing ``market share growth and good revenue growth in China,'' he said.
Trying to catch up with Google, Microsoft Corp. has bid $44.6 billion for Yahoo! Inc., a transaction that would combine the second- and third-biggest search engines. While Yahoo rejected the bid in February, analysts and shareholders say the board may eventually agree to the purchase.
ComScore spurred concern that the number of people clicking on Google's text ads -- the four lines of ad copy that run next to search results -- had stalled last quarter. The promotions account for almost all of Google's revenue.
The research firm, which issues monthly reports on ad-click numbers, said the growth had slowed to 1.8 percent in the first quarter. In today's report, Google cited growth of 20 percent.
Different Data
The discrepancy may stem from the way ComScore measures the data. The company only tracks domestic ad clicks and doesn't include results from Google's AdSense service, which places ads on Web sites such as online newspapers and blogs.
ComScore spokesman Andrew Lipsman declined to comment.
In either case, the growth is down from 52 percent in the first quarter of 2007.
``It's a far cry from where it used to be,'' Snorek said.
To expand into new types of advertising, Google bought DoubleClick Inc. in March for $3.24 billion. The company helps customers manage online marketing campaigns. In its biggest round of job cuts ever, Google fired about 10 percent of DoubleClick's workers this month. The company said it added 2,351 employees in the quarter.
Google's operations generated cash of $1.78 billion last quarter, bringing its total cash, equivalents and marketable securities to $12.1 billion.
Douglas Anmuth, an analyst at Lehman Brothers Holdings Inc. in New York, had expected a drop in finance-related searches to curb sales growth. Financial firms cut back spending after the subprime mortgage meltdown spurred the near-collapse of lender Countrywide Financial Corp. and investment bank Bear Stearns Cos.
Finance Crisis
Bear Stearns's ad spending fell 10 percent in the fourth quarter from the third. In March, JPMorgan Chase & Co. agreed to buy the New York-based company amid a run on the securities firm by clients and creditors.
Mortgage lender Countrywide's fourth-quarter ad budget dropped 5 percent. The Calabasas, California-based company agreed to be acquired by Bank of America Corp. in January after mortgage-related losses caused the stock to slump 85 percent in 12 months.
Consumer sentiment in the U.S. fell to its lowest level since 1982 this month, according to a preliminary report from Reuters and the University of Michigan, as employers cut hundreds of thousands of jobs and oil prices climbed to a record.
Google's Schmidt said today that the company remains well positioned because its systems can target ads at specific consumers.
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