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Thursday, October 19, 2006

Google Up 5% on Initial Earnings Response

Google (GOOG) is up over 5% close to $450 in after-hours trading on the initial reaction after a strong report. We were asking just how much better the company would have to do compared to consensus, and the answer looks like this report will more than suffice.

GOOG posted $2.62 EPS and $1.865B revues vs. $2.42 and $1.81 estimates.

They hired about 1,400 workers just in the last 3 months. TAC was $825 million and some estimates were $820 million, so you are not seeing a massive sacrifice from the company to drive traffic.

Google-owned sites generated revenues of $1.63 billion, or 60% of total revenues, in the third quarter of 2006. Google Network Revenues partner sites generated revenues, through AdSense programs, of $1.04 billion, or 39% of total revenues. International Revenues from outside of the United States contributed 44% of total revenues in the third quarter. GAAP operating income in the third quarter of 2006 was $931 million, or 35% of revenues. Effective tax rate was 29% for the third quarter and currently anticipate that our effective tax rate for the full year will be at or below 30%.

"Our third quarter results are a testament to the strength of our network of advertisers and partners, as well as our continuing focus on users," said Eric Schmidt, CEO of Google. "We were particularly pleased with the contributions of our international business in a seasonally weaker quarter. In addition, we continued to forge significant partnerships with companies such as eBay, Fox Interactive Media, and Intuit that will be of great value to all involved."

It looks like the YouTube guys are now selling their company for even a tad more than the $1.65 Billion price tag based on the stock reaction.

Jon C. Ogg

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