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[April 13, 2012]

Google announces stock split

Apr 13, 2012 (San Jose Mercury News - McClatchy-Tribune Information Services via COMTEX) -- Mountain View search giant Google (GOOG) on Thursday reported a 61 percent jump in quarterly profits compared to a year ago and announced its first stock split since going public in 2004.

The two-for-one split will result in new non-voting shares for current investors and will maintain control of the company in the hands of co-founders Larry Page and Sergey Brin.

"We have a structure that prevents outside parties from taking over or unduly influencing our management decisions," the co-founders said in a letter made public with their earnings report. " We have put our hearts into Google and hope to do so for many more years to come." Google posted a profit of $2.89 billion on sales of $10.65 billion, which amounted to earnings of $8.75 a share. Analysts surveyed by Thomson Reuters on average had predicted it would report just under $8.2 billion in sales and earnings of $8.31 per share.

Some analysts said the stock split makes sense.

"This is a very smart move," Global Equities Research analyst Trip Chowdhry said, because it maintains the founder's control while lowering the price of the stock, which "brings in new investors." He added that stock splits also preserve cash, as opposed to paying investors a dividend.

Google announced earnings and the split after the official end of trading, when its shares closed at $651.01, an increase of $15.05 or 2.37 percent. In early after hours trading, the shares rose another $2.79.

Andrew Tonner, a Motley Fool technology and media analyst, called the quarterly earnings report a welcome improvement from last quarter, where Google's earnings per share missed Wall Street's expectations.

"Overall, it's a pretty impressive performance," he said, noting that lately, "people have been somewhat down on Google." In recent months, some analysts have expressed nervousness about the company's wide array of ventures and have groused about it failing to provide specifics about some aspects of its business. One concern is Google's proposed $12.5 billion purchase of Motorola Mobility.

The deal, which would give Google control of a prominent maker of smartphones, tables and TV set-top boxes, in February won the blessing of United States and European regulators. But China is still reviewing the acquisition. Even if the deal goes through, Wells Fargo analysts told their clients in a note this week that Google will need time to integrate Motorola, adding that "operating the hardware business will bring challenges." Another worrisome issue for some analysts is how well the Google+ social network launched last summer will fare against other social network sites, notably the vastly larger Facebook.

"Even with a fast start, Google+ is barely 10 percent of Facebook's user size," Wedge Securities cautioned in a note to its clients Thursday. However, it added, one bit upside for Google were the problems besetting its competitor Yahoo (YHOO), which is undergoing a major reorganization.

Google's revenue growth rate has been outpacing Yahoo's, the Wedge Securities note said, "and we think the gap will increase" this year because Yahoo "is likely to further de-emphasize search as part of another new strategy direction." Another positive is that display advertisers "are finding opportunities to spend with Google" and the company has been keeping its expenses down by doing "relatively moderate hiring," analysts at Macquarie Equities Research concluded in their own report this week.

Contact Steve Johnson at sjohnson@mercurynews.com or 408-920-5043 ___ (c)2012 the San Jose Mercury News (San Jose, Calif.) Visit the San Jose Mercury News (San Jose, Calif.) at www.mercurynews.com Distributed by MCT Information Services

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