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News : Innovation Last Updated: Oct 18, 2013 - 10:29 AM

Google Inc. posts a 36% surge in quarterly profit; Tax rate dips to 15%
By Finfacts Team
Oct 18, 2013 - 7:53 AM

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From left to right - Google's top management, Eric Schmidt, Larry Page and Sergey Brin in a self-driving car, Thursday, Jan 20, 2011, at Google's headquarters, Mountain View California.

Google Inc. on Thursday posted a 36% surge in third quarter profit and investors sent its shares to record levels in after hours trading. The search engine giant offset lower advertising rates on mobile devices by selling a higher volume of ads. The global tax rate fell to 15%.

“Google had another strong quarter with $14.9bn in revenue and great product progress,” said Larry Page, CEO of Google. “We are closing in on our goal of a beautiful, simple, and intuitive experience regardless of your device.”

The trend of rising quarterly revenue is good spin news for Ireland as over 40% of the global revenues become Irish exports. Last year the ex-US tax rate was 4.4% and all the foreign net income of $8.1bn was routed through Ireland.

Google reported consolidated revenues including Motorola, of $14.89bn for the quarter ended September 30, 2013, a rise of 12% compared to the third quarter of 2012.

Net revenue, which excludes payments to ad partners, was $11.92bn, up from $11.33bn. Net income rose to $2.97bn, or $8.75 a share, from $2.18bn, or $6.53 a share. Excluding the cost of stock options, Google’s third-quarter profit was $10.74 a share.

Google segment revenues from outside of the United States totaled $7.67bn, representing 56% of total Google segment revenues in the third quarter of 2013, compared to 55% in the second quarter of 2013 and 53% in the third quarter of 2012.

Google segment revenues from the United Kingdom totaled $1.39bn, representing 10% of total Google segment revenues in the third quarter of 2013, compared to 11% in the third quarter of 2012.

The effective tax rate was 15% for the third quarter of 2013, down from 23% a year before and Patrick Pichette, CFO, said on a conference call that the rate fell because of the mix of earnings between its US and overseas subsidiaries, without going into detail.

Paid clicks grew 26% compared with the prior year, the highest growth rate in a year. However, the average price that advertisers paid Google when people clicked on ads fell 8%, making it two years of falls.

Mobile ads cost half to two-thirds as much as desktop ads, however, they lead to purchases just a quarter to a third of the frequency that desktop ads do. Advertisers are searching for the best format for mobile ads, but it's not easy tracking the effectiveness of on small screens.

The New York Times says Google is still the leader in online advertising, earning 41% of all digital ad revenue and 53% of mobile ad revenue, according to eMarketer. Yet the advertising business is changing under its feet.

As of September 30, 2013, cash, cash equivalents, and marketable securities were at $56.52bn. On a worldwide basis, the firm employed 46,421 full-time employees (42,162 in Google and 4,259 in Motorola Mobile) as of September 30, 2013, compared to 44,777 full-time employees (40,178 in Google and 4,599 Motorola Mobile) as of June 30, 2013.

Google's shares rose 8% in after-hours trading on Thursday to $959.59 and at close of business at 4:00 pm Eastern on Thursday, its market value was $296bn.

Results detail

Google set up well for international recovery: Discussing whether concern for Google's mobile monetization still exists, with Mark Mahaney of RBC Capital Markets. Mahaney. "There is a lot of good to come from Google over the next 12 months," he says.

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© Copyright 2011 by Finfacts.com

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