Google (GOOG) topped first-quarter earnings expectations late Thursday but sales just missed forecasts, as CEO Larry Page hinted that its struggling Motorola Mobility unit is working on indestructible smartphones.
Earnings excluding items rose 15% to $11.58 a share from $10.08 a year ago. Analysts had expected $10.64 per share, according to FactSet Research.
Revenue excluding what Google pays to other websites to carry ads climbed 36% to $11.01 billion. Wall Street was looking for $11.1 billion.
Google shares rose 1.5% in late trading after falling more than 2% to a two-month-low 765.35 in Thursday's regular session.
Global Equities analyst Trip Chowdhry described Google's Q1 numbers as "good," but asked, "What does the future hold for Google?
One of Google's biggest bets is cellphone-maker Motorola Mobility. But the unit hasn't put out a phone since Google took over last year, and its sales are slipping. Motorola revenue was $1.02 billion, or 7% of total Google revenue. That is down from $1.51 billion, or 11% of total revenue in Q4 2012.
"Motorola sales were below estimates," wrote Cantor Fitzgerald analyst Youssef Squali.
But Google's Page on a conference call with analysts hinted that Motorola is working on hardware with long-lasting batteries and tough exteriors.
"If your kid spills a drink on your tablet, the screen shouldn't die. When you drop your phone, it shouldn't shatter," Page said. "Having seen Motorola's upcoming products myself, I'm really excited about the potential.
Google's cost-per-click advertising rate fell 4% vs. the prior quarter, continuing to slide as part of an industry shift to mobile ads as smartphone and tablet use soars.
Advertisers aren't yet willing to pay as much for those ads as they are for traditional desktop ads, though the CPC decline has eased in the last few quarters.
"Mobile is really on fire," CFO Patrick Pichette told analysts.
Total paid clicks on Google ads were up 20%, but analysts expected 21%, according to Squali.
"I'm not worried about the CPC," said Chowdhry. "It needs some tweaking, but the core business velocity is on track.
Google's Chilling FutureBefore the earnings report, the search giant's Q1 profit margin was seen as a "wild card," wrote Jefferies Equity Research analyst Brian Pitz. It's difficult to forecast costs and sales for Motorola and Google's nascent Nexus tablets and phones, he said.
There are a few big projects getting a lot of attention from Google engineers, but aren't yet affecting sales, says Page. Google's announced two new cities for its hyper-fast Fiber Internet in the last two weeks. Google Glass, its foray into wearable computer glasses, arrived this week for the first group of buyers.
"I get chills when I use a product that is the future," Page said, "and that happens when I use Glass.
With those projects getting a lot of engineering attention, "we think Google is attractively valued for a stock with such a compelling growth story," wrote analyst Pitz, who rates the stock a buy.
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