Jan. 31 (Bloomberg) -- Google Inc., owner of the most-used Internet search engine, posted fourth-quarter profit that missed analyst estimates, snapping a streak that has propelled the stock since it went public in 2004.

The shares plunged 12 percent after the company's 82 percent rise in net income disappointed investors seeking justification for a stock price that has more than doubled in a year. Today's earnings are the first time Mountain View, California-based Google has missed estimates in six quarters.

The results represent a rare misstep for Google, whose advertising revenue linked to search results has given it a market value greater than Coca-Cola Co. and Cisco Systems Inc. Google's larger-than-expected spending on marketing and a jump in the company's tax rate weighed on profit. Sales rose 86 percent to $1.92 billion, meeting estimates.

``There might be some realization that they are in the advertising business, not the rocket-ship business,'' said Jane Snorek, who helps manage $110 billion, including Google shares, at US Bancorp Asset Management in Milwaukee.

Net income rose to $372.2 million, or $1.22 a share, from $204.1 million, or 71 cents, a year earlier, Google said today. Profit, excluding one-time items, was $1.54 a share, short of the $1.78 prediction of Jefferies & Co.'s Youssef Squali.

Google shares, up 31 percent in the fourth quarter alone, tumbled $53.65 to $379.01 in extended trading. They earlier rose $5.84 to $432.66 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

The shares surged since being sold at $85 in August 2004 and gave Google a market value of $128 billion at today's close.

Spending Doubled

``They have been handily been beating all of the estimates,'' said Sasa Zorovic, an analyst at Oppenheimer & Co. in Boston, who has a ``buy'' rating on the shares. ``This is now the first time that this tradition at Google has been broken. The aura now is a thing of the past at Google.''

Google's report came two weeks after Sunnyvale, California- based Yahoo! Inc., the second most-used search engine, reported profit that missed analysts' estimates. Seattle-based Amazon.com Inc., the world's biggest online retailer, reports Feb. 2. Shares of Yahoo fell 1.7 percent, to $33.78 after Google's announcement. Amazon dropped $1.02, or 2.3 percent, to $43.80.

``I was somewhat astonished'' at Google's stock decline, Chief Financial Officer George Reyes said in an interview. ``We're here to build a business for the long term. We'll take this quarter in stride.''

Taxes

Higher taxes caused the profit shortfall, Reyes said. The tax rate rose to 41.8 percent from 31 percent in the third quarter. International businesses contributed 38 percent of sales.

Squali, ranked among the most accurate Internet analysts by StarMine Corp., was 2 cents above the average $1.76 profit estimate of 31 analysts surveyed by Thomson Financial. Net revenue, after sales passed on to other Web sites, doubled to $1.29 billion, matching analysts' estimates.

Chief Executive Officer Eric Schmidt doubled Google's spending on marketing to $154.8 million, compared with Squali's $128 million estimate. His decision to spend rather than hold back and meet estimates reflects a commitment by founders Sergey Brin and Larry Page to avoid pandering to Wall Street.

``They have told us that they really don't care if they invest a lot in one quarter and don't make our numbers,'' Snorek said. ``This is proof that they really don't care.''

Margins Widen

Google's operating profit margins were 63 percent, and the company reported a doubling of earnings before interest, taxes, depreciation, amortization, stock-based compensation, in-process research and development and a contribution to Google's charitable foundation. That matched estimates by Piper Jaffray & Co.'s Safa Rashtchy in Menlo Park, California.

Analysts should expect more spending on research and development, Reyes said on a conference call. The company increased spending on building its sales force and promoting its toolbar for Web browsers, he said. Google added 691 employees in the quarter, ending the year with 5,680 workers, compared with 3,021 the same time a year earlier.

Google is making ``significant investments'' in all of its businesses, Reyes said. He said the company will continue to invest ``heavily'' in its computing infrastructure.

`Buy on Weakness'

Goldman, Sachs & Co. analyst Anthony Noto, the top-ranked analyst by Institutional Investor magazine, said in a note before Google's conference call that his $500 estimated value of Google shares ``should be fine.'' The New York-based analyst advised clients to ``buy on weakness.''

Unlike Yahoo's results, which indicated slowing growth in search, Google's sales indicated that returns are increasing and confirmed that it had taken market share.

Scott Devitt of Stifel Nicolaus in St. Louis downgraded Google shares to ``sell'' after Yahoo's results, saying Google had risen too far. Devitt is among three analysts who rate Google a ``sell.'' Noto, Zorovic and Squali are among 30 who have ``buy'' recommendations. Five say ``hold.''

Google handled 60 percent of Internet search queries in November, up from 47 percent a year earlier, according to ComScore Networks Inc., which tracks Web use and whose data excludes Asia. Yahoo's share fell to 19 percent from 27 percent, while Microsoft dropped to 10 percent from 12 percent.

Google's new features enabled the company to attract Web surfers away from Yahoo and Redmond, Washington-based Microsoft Corp. Google also boosted sales by showing more ads next to some searches and the company is now expanding its online advertising software to new media including print and radio.

During the quarter, Google agreed to buy a 5 percent stake in AOL from Time Warner Inc. for $1 billion, introduced its Gmail e-mail system for cell phones and merged its local search engine and maps sites to enable advertisers to target users more precisely.

``Google is going to be looking a little bit less of an immortal stock as it was until this point,'' Zorovic said. ``But I think the franchise remains very strong.''

To contact the reporter on this story: Jonathan Thaw in San Francisco at jthaw@bloomberg.net.

Last Updated: January 31, 2006 19:36 EST