Google Earnings Edge Expectations

CEO Eric Schmidt says Google's business has stabilized and consumers are searching more. The company reported slightly better results than anticipated.
Google saw its shares slip in after-hours trading despite a second-quarter earnings report that slightly surpassed analysts' expectations.

The search company on Thursday reported second quarter 2009 revenue of $5.52 billion, 3% more than the company earned during the second quarter of 2008.

Analysts had expected Google to report revenue of $5.49 billion for the quarter, according to Reuters.

Google CEO Eric Schmidt in a statement characterized the company's quarter as very good given the global economic downturn. "While most of the world's largest economies shrank, Google's year-over-year revenues were up 3%," he said. "These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs."

Google's cost cutting brought its operating expenses for the quarter to 28% of revenues, compared to 31% of revenues during the same period in 2008.

In a conference call for investors, CFO Patrick Pichette said that the company was pleased to have been able to manage its costs prudently while still funding innovative initiatives.

While frugality may boost the company's earnings per share, investors appeared unimpressed: Google's stock was down almost 3% about an hour after the stock market closed.

During the conference call, Schmidt described Google's recently announced operating system, Chrome OS, as central to the company's strategy. "We need faster operating systems for the same reason people need faster browsers," he said.

Jonathan Rosenberg, SVP of product management, elaborated on the need for speed as it applied to Chrome OS. "The whole new generation of Web-based apps demand a much better, faster user experience and once you've got all your stuff online, you should be able to open your computer and get there in a couple of seconds," he said.

Speed isn't just an issue for Chrome OS. Google has a basic user principle that fast is better than slow. Speed, said Rosenberg, is key for all of Google's projects.

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