Google profit rises, revenue misses some forecasts

SAN FRANCISCO (Reuters) - Google Inc posted a higher-than-expected fourth-quarter profit, but revenue growth was not as strong as some investors had hoped, sending its shares down 4 percent.

Google''s problems in China have been an overhang on the stock, which is down about 12 percent since hitting a 52-week high in early January. The company said last week that it might have to close its China operations after a cyber attack and its decision to stop censoring search results.

Chief Executive Eric Schmidt said on Thursday that the China business is unchanged but the company expects to make changes in a "reasonably short time from now."

Google''s fourth-quarter profit per share, excluding items, was $6.79, above the year-earlier period''s $5.10 and beating analysts'' average forecast of $6.48, according to Thomson Reuters I/B/E/S.

Net revenue, which excludes the traffic acquisition costs Google paid to partners, rose 13 percent to $4.95 billion, which was at the low end of some estimates for 13 percent to 15 percent growth. The average forecast was $4.92 billion.

Expectations "got higher as they came closer to reporting and they delivered fundamentally sound numbers, but did not deliver a blowout," said Martin Pyykkonen, senior analyst at Janco Partners. "I think the stock will recover. I don''t think it will fall through the floor.

Other analysts pointed to a disappointing 2 percent sequential rise in average cost per click, which is the price advertisers pay Google when Web surfers click on an ad.

"Earnings were much ahead of expectations, but top-line fell slightly below expectations," said Sameet Sinha, analyst at JMP Securities. "I think that is because cost per click was up about 2 percent sequentially, and we had been expecting closer to 5 percent growth."

Google, the world''s No. 1 search engine, said its headcount increased to 19,835 employees in the quarter, reversing three consecutive quarters of declines. And the company said it expected to continue to make significant capital expenditures.

"As we enter 2010, we remain hugely optimistic about the Internet and are continuing to invest heavily in technological innovation for the benefit not only of our users and customers, but also the wider Web," said Schmidt in a statement.

He said on a conference call that he expects Google to continue to make an average of one acquisition a month, and saw the mobile business providing the fastest revenue growth outside of search on a percentage basis in 2010.