Google's cost cutting pays off

By Brian Womack | January 24, 2009, Saturday |

Print Edition

GOOGLE Inc, owner of the most popular Internet search engine, beat fourth-quarter profit estimates yesterday after the company famous for boundless growth took a harder line on managing expenses.

Google slashed capital spending by 46 percent last quarter and added just 100 employees, compared with about 500 in the third quarter. The company also began eliminating some recruiters and closing businesses.

Google, whose sales have climbed 15-fold over the past five years, now faces the first recession since it became a public company in 2004. Growth of online advertising, Google's main source of revenue, is slowing as businesses curb spending.

"There's no sense in not being prudent," Chief Financial Officer Patrick Pichette said.

Google rose as much as US$18.50, or 6 percent, to US$325 in late trading yesterday after its earnings report. The shares, which lost 55 percent of their value last year, closed at US $306.50 on the Nasdaq Stock Market.

Fourth-quarter net income was US$382.4 million, or US$1.21 a share, the company said. Leaving out some costs, profit was US$5.10 a share, beating the US$4.96 estimated by analysts.

"They are doing better than everybody," said Ross Sandler, an analyst with RBC Capital Markets.

Microsoft Co, which owns rival site MSN, said it will cut up to 5,000 jobs as sales and profit deteriorate.

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Google's cost cutting pays off

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