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July 15, 2011 12:23 am
Larry Page, chief executive of Google, mounted a strong defence of the internet search company’s controversial investment priorities as it reported earnings for the second quarter that revealed an unexpected surge in revenues.
His comments come in the wake of mounting concerns on Wall Street that costs have spun out of control this year as Google has launched a number of ambitious expansion plans, including its recently launched Google+ social networking service.
Those fears were put aside on Thursday, however, as the company disclosed robust growth in its core search business in the three months to the end of June. Its shares jumped 12 per cent on the news in after-market trading, adding some $20bn to its stock market value.
Mr Page claimed early success for Google+, which was launched in a limited trial late last month. More than 10m people have joined the network and are sharing more than 1bn items a day on the system, he said.
Wall Street’s euphoric response to Google’s latest quarterly earnings marked a reversal from three months before, when a jump in costs wiped 8 per cent from its stock price. Costs continued to rise quickly in the latest period as Google added another 2,550 workers, though the news was outweighed by accelerating growth.
Net revenues grew 36 per cent to $6.92bn, ahead of the 29 per cent growth that had been expected. On the pro-forma basis on which Wall Street assesses the company, net income rose 37 per cent to $2.85bn, or $8.74 a share, up from $6.45 a share the year before.
Referring to controversial investments the company has made, such as its development of a driverless car, Mr Page said: “We’re very careful stewards of shareholders’ money – we’re not betting the farm on this stuff.”
The Google co-founder also went out of his way to appease Wall Street after appearing to give scant regard to its concerns on a cursory appearance on an earnings call when he took over as chief executive in April. “I understand the need to balance the short-term with the longer-term needs,” he said, adding that short-term revenues were the “engine” on which Google’s long-term plans depend.
Mr Page also claimed success for a management shake-up he pushed through, and which he said had ”substantially improved” the company’s operations. Google has faced mounting criticism from former employees in recent years over its growing bureaucracy, a charge levelled again this week by a product manager whose ideas played a key role in the development of Google+.
In the latest quarter, Google said its jump in revenues was underpinned by an 18 per cent increase in “paid clicks”, or the number of times users click on its adverts, along with a 12 per cent increase in the cost of each click. However, operating expenses rose by 49 per cent, partly because a company-wide pay rise led to fewer people leaving for other jobs than had been expected.
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