Google to resume hiring, acquisitions

Google Inc, the world’s most popular Internet search engine, plans to resume hiring and acquisitions after the recovering economy helped third-quarter sales beat analysts’ estimates.

Excluding revenue passed on to partner sites, sales jumped 8.4 percent to $4.38 billion from a year earlier, the company said. That compared with an average estimate of $4.25 billion in a Bloomberg survey of analysts.

Large customers stepped up spending on Google ads last quarter, a rebound from the first half of the year, Chief Financial Officer Patrick Pichette said. With the economy improving, the company can go back to investing, he said. Google had trimmed jobs and shut down underperforming businesses this year to rein in spending.

“We weathered what is an incredible recession,” Pichette said in an interview. “If you have all this behind you, the only outcome you should have as management is: ‘OK, let’s build now.’”

Net income rose 27 percent to $1.64 billion, or $5.13 a share, from $1.29 billion, or $4.06, a year earlier, the Mountain View, California-based company said. Leaving out some costs such as stock-based compensation, profit was $5.89 a share. Analysts had estimated $5.43.

Accelerating growth?
“These are very strong results -- above even the highest expectations out there,” said Andy Miedler, an analyst with Edward Jones in St Louis. He rates the stock a buy and doesn’t own it. “As the economy continues to improve, we expect accelerating growth.”

Google’s plan to boost spending may have tempered investors’ enthusiasm, said Ben Schachter, an analyst at San Francisco-based Broadpoint AmTech Inc.

“The stock would be further up if not for the bit about them investing heavily,” he said.

“We’re going to invest,” Chief Executive Officer Eric Schmidt said on a conference call with analysts. “That, I think, ultimately is good for the long term of Google.”

The company’s acquisitions will be mostly smaller companies that might help with search technology or advertising, Schmidt said. While Google is open to big purchases, those deals will be rare, he said.

Fifty companies
“They are probably the most acquisitive company in technology right now,” Gene Munster, an analyst at
Piper Jaffray & Co in Minneapolis, said in an interview with Bloomberg Television. “There are probably 50 companies out there they could acquire that will make their ads more relevant.”

Google’s paid clicks -- the number of times its ads were clicked on by consumers -- climbed about 14 percent last quarter. The average amount that Google charges for each click declined from a year earlier, falling 6 percent, a sign that advertisers are paying lower rates. Those rates may recover again as the recession eases, said Martin Pyykkonen, an analyst with Janco Partners Inc in Greenwood Village, Colorado.

Google took a harder line on expenses earlier this year, eliminating waste and shutting down some of its free employee cafes. It also closed businesses, such as a radio-programming division. In March, the company cut about 200 sales and marketingpositions, or 1 percent of its workforce.

Capital expenditures fell to $186.3 million last quarter from $451.5 million a year earlier. Google has maintained its dominance in the Internet search market this year, warding off an attack from Microsoft Corp’s Bing, which debuted in June.

Google had 64.9 percent of the US market last month, compared with 65 percent in May, according to ComScore Inc in Reston, Virginia. Microsoft’s share grew to 9.4 percent from 8 percent over that period -- mostly at the expense of Yahoo Inc, which fell to 18.8 percent from 20.1 percent.