Google Nails Q3 With 46% Profit

Google on Thursday shattered Wall Street estimates in its third quarter, posting a profit of $1.07 billion, or $3.38 a share, on sales of more than $4.23 billion.

Excluding costs related to employee stock options, Google earned $3.91 a share, well above the $3.78 a share profit expected by most analysts.

“It’s obvious to us that our model continues to work very well,” CEO Eric Schmidt said during a conference call with analysts. “We’re very pleased with our performance in what’s usually one of the seasonally weaker quarters.”

Google investors share Schmidt’s enthusiasm.

After shaking off a tepid reaction to its second-quarter results in July, Google shares have been on a tear, rallying up more than $110 a share in the past month alone.

Its shares closed up $6.14 per, or 1 percent, to $639.62 Thursday before rallying up more than $6 a share in after-hours trading following the sensational earnings report.

Google, in just its third year as a publicly traded company, has ascended to rarefied air and is now widely regarded as perhaps the most significant bellwether company in the information technology universe.

And its performance in the past quarter suggests its partners, customers and shareholders can expect more of the same for the foreseeable future.

The $4.23 billion in sales marks a staggering 57 percent improvement from the year-ago quarter. Excluding commissions Google pays to its advertising partners, the Mountain View, Calif.-based company recorded sales in excess of $3 billion in the past three months.

Google-owned sites generated a total of $2.73 billion in sales while its partner sites, through its rapidly growing AdSense programs, accounted for another $1.45 billion. That’s a 40 percent surge from the year-ago quarter and an 8 percent jump from the $1.35 billion in sales it garnered in its “disappointing” second quarter.

International sales in the quarter rose to $2.03 billion in the quarter, and now represent almost half (48 percent) of Google’s revenue base. In the United Kingdom alone, Google pocketed $661 million in sales, a 16 percent improvement from the year-ago period. The company also enjoyed similar growth in Europe and Asia and is currently investing heavily in the Latin American market.

But Schmidt, along with co-founders Sergey Brin and Larry Page, seemed more interested in talking about the future than the past. They highlighted the early traffic and interest the company has seen for its Google Apps and Google Docs features, as well as the promise for not only cloud computing, but also its role in the emerging sector.

“We’re seeing a massive move to cloud-based computing,” Schmidt said. “We’re on the cusp of a world where people can create content on the cloud anytime and anywhere.”

In the third quarter, Google launched Presentations, a free Web-based application that has much of the same functionality as Microsoft’s ubiquitous PowerPoint offering. It also rolled out a beta version of Google Gears, an open-source browser extension that enables Web-based applications to provide offline functionality using JavaScript APIs.

During the conference call, Brin cited the University of Phoenix, Northwestern University and Capgemini as three of the largest installed users of its online suite of applications for e-mail, calendaring and word processing.

“We’re excited about working with third parties in the enterprise space that can plug our technology in where it makes sense and deploy some of the apps into their application suites,” he said. “It’s very convenient and has the potential to change how people work together.”

Not forgetting its bread-and-better search and advertising businesses, Google said it plans to roll out and experiment with more technologies and interfaces to give advertisers more options to reach prospective customers.

It’s now running text-based ads across the bottom of YouTube videos and will continue developing new advertising widgets that include interactive features geared to both searchers and advertisers.

“It’s not flashy or in-your-face stuff,” Brin said. “We put functionality on the advertisement and let people interact with it.”

Another important number buried at the bottom of the earnings report release: Google exited the quarter with more than $13.1 billion in cash.

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