Google (GOOG) late Tuesday topped Q4 earnings forecasts but fell short on revenue as the tech giant offered a glimpse into its ongoing "messy" integration of handset-maker Motorola Mobility.
Mountain View, Calif.-based Google earned $10.65 a share excluding items, up 12% from $9.50 a year ago and beating analyst views for $10.47. That followed a rare 7% EPS drop in Q3.
Revenue grew 39.5% to $11.34 billion, excluding what the search giant pays other websites to display its ads. Analysts expected $12.34 billion.
Wall Street was happy: Google shares jumped 4.8% in after-hours trading.
But Google also left some doubt as to how well Wall Street's views matched up with its report. It excluded sales and earnings from Motorola Home, a division of its newly acquired Motorola Mobility. The TV-set-top box maker is being sold for $2.35 billion to Arris in a deal scheduled to close in Q2 2013.
"Right now there are two Googles — old Google and Motorola Mobility," said Global Equities analyst Trip Chowdhry. "Motorola Mobility is messy and not doing well.
Reporting Motorola Home separately made it seem that Google missed sales views badly, "but that's not the true story," said B. Riley Caris analyst Sameet Sinha. But if Motorola Home was included in core sales, Q4 revenue would have been $12.16 billion, still lower than forecasts.
Confusion over Google's Q4 reporting began Friday, when its chief accountant issued a rare pre-earnings warning that Wall Street might not be "fully aware" of an accounting change. Some analysts didn't appreciate the late notice.
"I would definitely say Google has been doing an F-grade job when it comes to communicating concerns about Motorola Mobility," said Chowdhry. "They need to be proactive.
The Search For 'Meaning'
CEO Larry Page offered a rebuff to Facebook (FB), the social network that last week announced that it was launching its own search engine. Facebook CEO Mark Zuckerberg said Graph Search is the best way to find personalized information.
But Page, on a conference call with analysts, said that Google's Knowledge Graph is the best way for understanding "meaning and context" for individual users. Google aims to give users exactly what they want and need, he said.
"The way we look at it is that we provide much better answers for people," Page said.
As expected, Google's per-click advertising rate declined for a fifth straight quarter. The price advertisers were willing to pay for a click fell 6%.
But 24% growth in clicks in Q4 "covered" for the decline, wrote BGC Partners analyst Colin Gillis in a pre-earnings note. Most of the growth has been from users on Android mobile devices that are "a laggard" in pricing vs. desktop advertising.
Citigroup analyst Neil Doshi also expected the drop.
"This seems appropriate as our channel checks returned solid but not markedly strong trends," wrote Doshi, who rates Google stock a buy.
Page told analysts Google will continue pushing into the hardware business, which has been one of the "biggest bets of the last few years." Creating Android devices to get ads in front of new users is a priority, he said.
"Our calling is to push the user experience forward, so you get the best of Google in one easy package," he said.