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Google Disappoints the Street

On news of Q4 results, the Web search giant's executives admit to issues with advertising on social networks, and defend R&D expenses
Eric Schmidt, Google chairman and CEO.
Eric Schmidt, Google chairman and CEO. Pierre Verdy/AFP/Getty Images

It's not the economy, stupid. That was the message from one Google (GOOG) executive after another on Jan. 31 as they tried to explain why the company's fourth-quarter results failed to match Wall Street expectations. "We have not yet seen any negative impact from the rumors of a possible recession," Google CEO Eric Schmidt said during a conference call after the figures were released. "We are quite optimistic about '08, and our model continues to work very well," he added.

And it's not like Google had a big miss either. The owner of the most highly trafficked Web search engine said fourth-quarter profit rose 17%, to $1.21 billion, as sales jumped 51%, to $4.83 billion. But net revenue, the amount Google retains after paying a share to partner Web sites, was $3.39 billion, about $60 million less than Wall Street's estimates. Per-share earnings, excluding stock paid to employees, were $4.43, a penny shy of analysts' forecasts.