Google exceeds 4Q forecasts, though earnings drop

SAN FRANCISCO: Google Inc's profit slipped for the first time in the fourth quarter, but the Internet search leader is still weathering the economic storm better than analysts anticipated.

The results released on Thursday indicated the Mountain View, California-based company was able to rein in its free-spending ways enough to offset a slowdown in the online ad market that generates most of Google's revenue. That contrasted with a missed forecast and 5,000 layoffs announced earlier in the day by rival Microsoft Corp.

Even so, there were signs the recession is starting to bear down on Google.

The downturn forced Google to write down $1.1 billion of the combined $1.5 billion that it has invested in two troubled companies, AOL and Clearwire Corp. And Google is allowing its 20,222 employees to swap their outstanding stock options for new ones that will carry a lower exercise price - which means the workers will have a better chance of making money from the options.

The move was driven by 47 per cent drop in Google's stock price over the past year, leaving about 17,000 employees holding options that are "under water" and can't be cashed in now at a profit.

Although he hailed his company's strength in a decrepit economy, Google Chairman and CEO Eric Schmidt signalled the challenges are becoming more daunting by describing the fourth quarter as "the easy part" and calling the upcoming months as "uncharted territory".

Revenue climbed 18 per cent to $5.7 billion. That marked the first time Google's revenue growth had fallen below 30 per cent from the previous year.