Friday 22 September 2017

Spending binge hits Google share price

Brian Womack

Google fell the most in nine months after a first-quarter hiring binge and increased marketing led to the biggest jump in operating expenses in three years.

First-quarter operating costs rose 54pc, outstripping a sales gain of 29pc to $6.54bn (€4.5bn), the California-based company with Dublin offices said yesterday. Profit excluding some items was $8.08 a share, below the average analyst estimate of $8.12 compiled by Bloomberg.

Larry Page, who replaced Eric Schmidt as chief executive officer last week, is ramping up spending to pursue new growth opportunities, including mobile and video advertising.

Google, which has 2,000 staff here, boosted hiring by more than 1,900 people during the quarter, part of a plan to add at least 6,000 this year. At the same time, it is grappling with growing regulatory scrutiny of the company's market-leading internet-search business.

"The concern is that the expense discipline may be leaving as Eric Schmidt steps away," said Clayton Moran, a US-based analyst at Benchmark, who recommends buying the stock.

"The company through the recession had shown significant financial discipline."

Google declined $35.58, or 6.2pc, to $542.93 in Nasdaq stockmarket trading. The shares dropped 2.6pc this year before yesterday.

The $6.54bn in sales -- a figure that excludes revenue passed on to partner sites -- topped the $6.32bn average of estimates. First-quarter net income climbed 18pc to $2.3bn (€1.6bn), or $7.04 a share, from $1.96bn (€1.36bn), or $6.06, a year earlier.

"The investors we have actually understand that we are building businesses for the long term," Patrick Pichette, chief financial officer, said in an interview yesterday. "They also want growth, which we delivered this quarter." (Bloomberg)

Irish Independent

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