Internet advertising giant Google has defied the global economic downturn and delivered better-than-expected quarterly results.
The company posted revenue of $US5.51 billion in the three months to 31 March, up 6% from the corresponding period a year ago. Profit levels rose 8.9%, coming in at $US1.42 billion, up from $US1.31 billion a year ago, after the company shed thousands of jobs and cut back on revenue-neutral experimental programs.
The profit result was about 4% ahead of analyst forecasts, an impressive effort given the climate.
But it wasn’t all good news. In a worrying sign that the downturn is affecting the industry leader, the figure is down 3% from the previous quarter – the company’s first quarterly decline.
Google shares rose nearly 3% after the announcement, but chief executive Eric Schmidt said in a conference call that the company is still battling through the downturn and that “no company is recession-proof”.
“We’re still basically in uncharted territory,” Schmidt told Reuters. “Google is absolutely feeling the impact. Users are still searching but they’re buying less. Ultimately, what that really means is the ads are converting less.”
The company also says that the company is not changing its “conservative view towards cash management”, which indicates the group will continue to shed revenue-neutral programs.
JMP Securities analyst Sameet Sinha told Reuters that advertising companies such as Google will be focusing more on their fundamental online services.
“As advertisers are getting better control of their budget and a better understanding of their business under these macro conditions, they are taking money away from newspaper and television and going back online to advertise; and Google gets a disproportionate part of the market,” he said.
Meanwhile, Itnews.com.au has reported that Yahoo is preparing to lay off hundreds of workers, according to a high-level source.
The retrenchments would be the first since Carol Bartz took the chief executive job from Jerry Yang in January, and may be announced along with first quarter results next Tuesday.
The company’s last round of job cuts was in December, when by the end of the year the company was down 1600 employees from the previous quarter’s total of 13,600.
Yahoo has declined to comment on the rumours.
Finland-based mobile manufacturer Nokia has also announced its results, and recorded a 90% plunge in profit during the first quarter as sales of new handsets plummeted.
But the group, which also announced last month that it plans to cut 1700 jobs, announced that retailers will be forced to buy new handsets as existing stock runs out.
“The inventory already in the sales channels decreased substantially during the first quarter due to extensive destocking by operators and distributors,” chief executive Olli-Pekka Kallasvuo said.
“This adversely impacted our sales volumes in the quarter. However, it has also resulted in the demand picture becoming more predictable as we enter the second quarter.” Nokia shares jumped 13% after the announcement.
The company recorded a 27% fall in sales for the first quarter, and for the first time recorded a loss of $22 million before tax, its lowest profit level in a decade.
“Nevertheless, it is too early to conclude that the end-user demand has touched bottom,” Kallasvuo said. “The global economy as a whole remains weak, and we are planning our business accordingly.”
Nokia shipped 93.2 million phones in the first quarter, a 19% year-on-year decline and an 18% decline from the previous quarter. The company says its market share dropped 2% from the previous quarter to 37%, but was buffered by the sale of smartphones to rival the Apple iPhone.
The 5800 XpressMusic, which was released in November, sold 2.6 million units in the first quarter. Gartner research director Carolina Milanesi told The Guardian that “the 5800 was an important driver in the smartphone category”.
“Although the market remained very challenging, the good news is that it is showing some signs that it is stabilising,” she said.
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Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
