Google aims to stay in China despite censorship clash

Google on Thursday gave the first indication that it would seek to stay in China even if it was forced to close down its local search service over its refusal to continue to bow to censorship.

“We have lots of other business opportunities in China – we would like them to be successful,” Eric Schmidt, chief executive, said in an interview with the Financial Times. “That’s not the only thing we’re doing in China.”

He was speaking shortly after Google had reported a solid rebound in its core search advertising business in the final quarter of last year, and revealed that it had increased hiring and marketing spending as it prepares for a renewed burst of growth coming out of the recession.

Mr Schmidt refused to comment on the progress of discussions with the Chinese authorities, though he stressed that Google was still intent on stopping censoring results on its local Chinese search service, and said the company would act “in a relatively short time”.

“It’s very important to know we are not pulling out of China,” Mr Schmidt said. “We have a good business in China. This is about the censorship rules, not anything else.”

The Google boss also played down the escalating competition with Apple, which has been triggered by Google’s push into mobile software in competition with the iPhone.

He refused to comment on a report that Apple was negotiating to replace Google’s search service on the iPhone with Microsoft’s Bing, but he hinted heavily that the partnership was set to continue: “As far as I can tell our business structures with Apple are quite stable.”

In its latest quarterly figures, Google said its revenue growth rate had rebounded to 17 per cent in the final months of 2009, after falling below 5 per cent at one point earlier in the year.

In spite of beating most analysts’ forecasts, the performance still fell short of Wall Street’s most optimistic assumptions and Google’s shares dropped by nearly 5 per cent in after-market trading.

With revenues bouncing back, the company took the brakes off its spending, as it had warned it would do three months earlier, and operating costs rose 9 per cent.

Google’s earnings per share on a pro forma basis – the measure by which Wall Street judges the company – jumped to $6.79 from $5.10 a year before, ahead of the official $6.43 forecast. However, many analysts also had more optimistic unofficial expectations, which the company failed to match.

Reported net income rose to $1.97bn, or $6.13 a share, from $382m, or $1.21 a share, a year before.

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