Google gets frugal to weather tough quarter

Stung by a first quarter that saw its revenue dip for the first time ever, Google did what the rest of us have been doing — it tightened up on household expenditures and cut way back on shopping. The result was a Q2 report that won’t make it into the trophy case but that did show some resilience in the face of continued global economic weakness. Revenue was virtually flat, in line with expectations, as some advertising categories began to pick up, albeit tentatively and at depressed levels. “For the first time, we saw a really big drop in revenue per search,” an indication that advertisers are paying less for ads or buying fewer, said Jeffrey Lindsay of Bernstein Research. “We thought it wouldn’t have deteriorated much from the first quarter, but obviously it has gotten worse.” Even so, by being thrifty, the search sovereign managed to post an 18 percent gain in profit over the year earlier period. Spending on capital projects was a mere $139 million where two years ago it was $575 million, and restraint in its hiring habits brought Google’s employee count down by 378 to 19,786. Don’t worry, though — the Googlers aren’t being forced to use pencil extenders or write on both sides of Post-It notes … or buy their own lunches. “We still have free food,” said CFO Patrick Pichette. “We still have massages. There is still a doctor on site.”

Overall, said CEO Eric Schmidt, there are signs that the situation is stabilizing, and while the future may still look like a dark pit, at least it no longer looks like a bottomless dark pit. “A quarter ago, we had no idea where the bottom was,” he said. “We are at the moment not looking at that downward spiral that we thought we might see six months ago.” And if there was a bright spot, it was the glow of YouTube, where Schmidt said advertising products were showing “significant revenue growth.” “If this continues,” he said, “eventually we could have a profitable business. This is the first time that I have seen a real improvement, one that I think is possibly sustainable.”

Meanwhile, on the heels of Tuesday’s bullish forecast from Intel, IBM added some more encouraging words. Big Blue’s quarterly sales slipped by 13 percent, in large part due to currency fluctuations, but profit was up by 12 percent, well above analyst expectations. As a result, IBM bumped up its forecast of annual revenue for this year to $9.70 a share from the $9.20 a share projected in January.

 
 

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  • LegalHype

    “Stung by a first quarter that saw its revenue dip for the first time ever, Google did what the rest of us have been doing — it tightened up on household expenditures and cut way back on shopping.”

    Great quote. Except that the Obama administration sees it the opposite way than the rest of us – when revenue dips, you need to spend more, borrow more, and raise your prices (taxes). Just ask Joe Biden. Which one is executing correctly – Google or the Obama administration?

 
 
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