Google Reports 70 Percent Decline in GAAP Net Income and Earnings for Q4

Days after announcing plans to lay off 100 recruiters, officials at the Internet’s search and ad leader today reported that quarterly net income and earnings per share fell 70 percent sequentially in the three-month period that ended Dec. 31.

 

Though officials at Google Inc. say revenues of $5.7 billion for the quarter represent an 18 percent increase year-over-year and 3 percent sequentially, GAAP net income for the fourth quarter fell to $382 million from $1.29 billion the prior three months, and GAAP earnings per share fell from $4.06 to $1.21.

 

According to the company’s chief executive officer, Eric Schmidt, Google (News - Alert) performed “well” in the quarter, despite an increasingly difficult economic environment.

 

“Search query growth was strong, revenues were up in most verticals, and we successfully contained costs,” said Schmidt, pictured right. “It’s unclear how long the global downturn will last, but our focus remains on the long term, and we’ll continue to invest in Google’s core search and ads business as well as in strategic growth areas such as display, mobile, and enterprise.”

 

Google reported non-GAAP net income in the fourth quarter of 2008 was $1.62 billion, compared to $1.56 billion in the third quarter of 2008, and non-GAAP earnings per share in the fourth quarter of $5.10, compared to $4.92 for the prior three-month period.

 

The company regularly reports operating income, net income, and earnings per share on a GAAP and non-GAAP basis.

 

“The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables,” Google officials say.

 

Today’s earnings report follows Google’s announcement, reported by TMCnet, that it’s laying off about 100 recruiters and has slowed its pace on hiring new employees.

 

In a blog post titled “Changes to recruiting,” Laszlo (News - Alert) Bock, Google’s vice president of “people operations,” said that the slower economy forced the Mountain View, California-based company to cut down on the number of people it had focused on hiring.

 

“Our first step to address this was to wind down almost all our contracts with external contractors and vendors providing recruiting services for Google,” Bock said. “However, after much consideration, we have with great regret decided that we need to go further and reduce the overall size of our recruiting organization by approximately 100 positions.”

 

The news doesn’t come as a total surprise.

 

Yet TMCnet reported, the layoffs come hard upon an announcement just two months ago that Google had no plans to let its full-time people go. The decision regarding the contract workers was said by some to show Google’s vulnerability during a global economic slowdown.

 

The reports of Google’s cutting back on contracts also come after the company announced that it’s pulling out of virtual world business.

 

Google released its earnings report moments after today’s closing bell.

 

It was a day that started with a bang for IT companies on Wall Street.

 

As TMCnet reported, the world’s largest maker of software today announced major year-over-year earnings dips and a plan to cut 5,000 jobs.

 

Hampered by slower spending on PCs – fueled, in part, by greater interest in “netbooks” – officials at Microsoft Corp. saw a net income decline of 11 percent, to $4.17 billion, for the quarter ended Dec. 31, as well as a 6 percent drop in earnings per share, to 47 cents.

 

Getting inside some of Google’s numbers, Web sites owned by the company generated $3.81 billion in revenues, or 67 percent of total revenues, in the fourth quarter.

 

“This represents a 22 percent increase over fourth quarter 2007 revenues of $3.12 billion and a 4 percent increase over third quarter 2008 revenues of $3.67 billion,” Google officials say.

 

Google officials also said their partner sites generated revenues, through AdSense programs, of $1.69 billion, or 30 percent of total revenues for the quarter, representing a 4 percent increase year-over-year and a 1 percent increase sequentially.

 

“Revenues from outside of the United States totaled $2.86 billion, representing 50 percent of total revenues in the fourth quarter of 2008, compared to 48 percent in the fourth quarter of 2007 and 51 percent in the third quarter of 2008,” Google officials say. “Had foreign exchange rates remained constant from the third quarter of 2008 through the fourth quarter of 2008, our revenues in the fourth quarter of 2008 would have been $334 million higher.”