Google's Q3 beats as ad volume grows, stock flirts $1,000 level

Reuters

By Alexei Oreskovic

SAN FRANCISCO, Oct 17 (Reuters) - Google Inc's quarterly results beat Wall Street's expectations as theInternet search giant expanded its mobile and overseasbusinesses while keeping ad-rate declines in check, sending itsshares to a record high.

The market reaction put Google's stock within strikingdistance of $1,000, following what analysts said was a strong,but not spectacular quarter.

Shares of the world's No.1 Internet search engine jumped 8percent to $959.65 in after-hours trading on Thursday, after itreported a 23 percent rise in revenue from its Internetbusiness, excluding fees paid to partners, of $10.8 billion inthe third quarter.

"Expectations going into earnings were a little muted," saidNeedham & Co analyst Kerry Rice. "They did what they needed todo to impress investors."

Google's business, like rivals Facebook Inc and YahooInc, has come under pressure as more consumers accessits online services on mobile devices such as smartphones andtablets, where advertising rates are lower than on PCs.

The average cost-per-click - the price that marketers payGoogle when consumers click on their ads - decreased 8 percentduring the third quarter, deepening the 6 percent price erosionthat Google experienced in the second quarter.

But the total amount of paid clicks increased 26 percentyear-on-year during the three months ended Sept. 30, the highestrate of growth in one year.

"That's the key story, their ad volume growth is outpacingthe decline in cost-per-clicks," said JMP Securities analystRonald Josey.

Roughly 40 percent of the traffic to YouTube, theGoogle-owned video website, now occurs on mobile devices, GoogleChief Executive Larry Page said on Thursday. Two years ago, only6 percent of YouTube's traffic occurred on mobile devices.

"Google's done a good job of being in the right place inmobile as it grows, and being able to monetize that," said Rice.

He also pointed to Google's 28 percent revenue growthoutside of the U.S. and Britain as further signs of Google'sstrength.

Google's results offered a sharp contrast to online rivalYahoo Inc, which reported a slight dip in quarterly revenue onTuesday and lowered its financial outlook.

NO MORE ANALYST CALLS FOR PAGE

On Thursday, co-founder and CEO Page told analysts he willno longer be joining the company's quarterly earnings conferencecalls on a regular basis.

"I know you all would love to have me on, but you're alsodepending on me to ruthlessly prioritize my time for the benefitof the business," Page said, without providing furtherexplanation for the change.

Page, who with Sergey Brin conceived of what is today theworld's most-used Internet search engine, is not known forassiduously courting Wall Street investors. And this year, Pagerevealed that his vocal cords are partially paralyzed as theresult of a rare medical condition.

Needham & Co's Rice said he did not expect Page to be anyless involved in running the company, noting that Amazon.comInc's CEO Jeff Bezos does not participate in thequarterly earnings calls.

Google executives also provided few details on therecently-launched MotoX smartphone, the flagship device withinGoogle's Motorola mobile phone business.

Operating losses at Motorola were $248 million during thethird quarter, compared to a loss of $192 million in the thirdquarter of 2012.

Google's consolidated business earned $2.97 billion, or$8.75 per share in the three months ended Sept. 30, compared to$2.18 billion, or $6.53 per share, last year.

Excluding certain items, Google said it earned $10.74 pershare, compared to the $10.34 that analysts were expecting,according to Thomson Reuters I/B/E/S.

Consolidated revenue of $14.89 billion compared with the$14.79 billion average analyst estimate.

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