Feeling the recession, Google’s revenue growth slows in first quarter

SAN FRANCISCO – Google Inc. eked out a higher profit in the first quarter as the Internet search leader trimmed its work force and winnowed other expenses to overcome the slowest revenue growth since the company went public nearly five years ago.

The results released Thursday illustrated how the recession is squeezing even prosperous companies like Google.

“No company is recession-proof,” Google chief executive Eric Schmidt told analysts in a conference call. “Google is absolutely feeling the impact.”

Schmidt and other Google executives repeatedly emphasized that the global economy remains in “uncharted territory.”

The cautionary comments seemed to deflate investors. After initially surging more than 5 percent, Google shares backed off and had fallen 47 cents to $388.27 in Thursday’s extended trading. The stock ended the regular session at $388.74, up $9.24.

Google is holding up far better than other advertising-driven businesses, largely because it relies on a marketing system that has proven to be less expensive and more effective than more traditional media.

The Mountain View, Calif.-based company earned $1.42 billion, or $4.49 per share in the first quarter. That was a 9 percent increase from $1.31 billion, or $4.12 per share, at the same time last year.

If not for employee stock compensation costs, Google said it would have made $5.16 per share. On that basis, Google exceeded the average estimate of $4.93 per share among analysts surveyed by Thomson Reuters.

Google’s first-quarter revenue totaled $5.5 billion. That was up by just 6 percent from last year, marking the first time the company has posted less than double-digit revenue growth since its August 2004 initial public offering.

After subtracting commissions paid to its advertising partners, Google’s revenue stood at $4.07 billion – about $10 million below analyst estimates.

In a telling sign of the recession’s toll, Google’s revenue fell from one quarter to the next for the first time. Its revenue in the prior quarter had been $5.7 billion.