Feeling better about Google's mobile transition

The search giant's profit increased by nearly 7% in the final quarter of 2012, as the company stemmed a slide in ad revenue.

By The Fiscal Times Jan 23, 2013 7:25PM
GoogleBy Suzanne McGee, The Fiscal Times 

The Fiscal Times logo This week, technology companies take their turn in the spotlight. And for some of them -- notably former market superstar Apple (AAPL) -- that's proving to be a most uncomfortable place to be.

The technology universe offers a muddled outlook, and that may be why the Nasdaq Composite Index ($COMPX) has lagged in recent weeks as other major market indicators have either set new highs -- the Russell 2000 Index ($RUT) -- or broken above technical barriers and into territory not seen in months -- the Standard & Poor's 500 Index ($INX). For the year, the Nasdaq is up about 4.5%, while the S&P 500 has risen closer to 5% and the Dow Jones Industrial Average ($INDU) has climbed 5.1%.

Trying to anticipate what kind of earnings will come from the technology universe is tricky, given the very different issues affecting various parts of that world.

On the one hand, the magnitude of the decline in Intel’s (INTC) earnings startled even some critics, serving as a reminder of just how gloomy the outlook is for the personal computing industry. (The semiconductor manufacturer issued a profits warning for 2013, and cautioned that its margins may take a beating.) Advanced Micro Devices (AMD) followed suit, although the magnitude of its fourth-quarter loss wasn't as great as analysts had anticipated.

Eyes on Google
And then came Google’s (GOOG) results, announced Jan. 22. The bottom line of $10.59 a share, excluding some items, beat analysts’ expectations of $10.42 a share. While revenue growth was an impressive 36%, it didn't measure up to what analysts had been looking for, at least once traffic acquisition costs were removed from the equation.

There are upsides that warrant a degree of optimism, though: The company announced an uptick in advertising and its average cost per click -- what advertisers fork over to Google every time you or I click on one of those buttons on a Google search return page or an ad on our Gmail accounts -- fell 6%, an improvement over the 15% slide in the third quarter. That encouraged analysts who had worried that the shift from computers to mobile devices would wallop Google’s business.

"We come out of the fourth quarter feeling better about Google's mobile transition and segment growth rate going forward," JPMorgan Securities analyst Doug Anmuth said in a note to clients, cited by Reuters.

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