Google profits rose 17% in Q4 2013, missing estimates

Google profits rose 17% in the fourth quarter of 2013, reaching $3.38 billion, thanks to stronger advertising sales.

However, its earnings for the quarter of $16.86 billion ($12.01 per share) were less than market expectations of $16.75 billion ($12.26 per share).

Google shares stopped rising (but did not fall either) after earnings were released. However, they have increased by over 50% during the last 12 months.

Larry Page, CEO of Google, said:

“We ended 2013 with another great quarter of momentum and growth. Google’s standalone revenue was up 22% year on year, at $15.7 billion. We made great progress across a wide range of product improvements and business goals.”

“I’m also very excited about improving people’s lives even more with continued hard work on our user experiences.”

Google profits dented by Motorola Mobility losses

The company’s loss in its Motorola Mobility unit increased to $384 million, compared to $152 million a year earlier.

In a press release on Wednesday, Google announced the sale of Motorola Mobility to Lenovo for the purchase price of $2.91 billion (subject to certain adjustments), including $1.41 billion paid at close, consisting of $660 million in cash and $750 million in Lenovo ordinary shares. The remaining $1.5 billion will be paid over a three year period with a promissory note.

Google will still own most of the Motorola Mobility patent portfolio, “including current patent applications and invention disclosures.”

News of the Lenovo-Motorola Mobility deal sent Google shares up yesterday, because it had been punching a hole in the company’s profits.

Google stock split announced

Google also announced that its Board of Directors have “approved a distribution of shares of the Class C capital stock as a dividend to our stockholders with a dividend record date of March 27, 2014 and a dividend payment date of April 2, 2014.”

Shareholders had been in discussions about a stock split for nearly three years, because of concerns that the co-founders – Larry Page and Sergey Brin – may benefit unfairly.

The new class of “C” shares have no voting power, unlike the class “A” ones.

Mobile advertising pricing woes

Google has, by far, the largest share in the global digital advertising market, leaving both Facebook and Yahoo a long way behind. However, the company has been unable to lift mobile advertising prices.

Although digital advertising is moving from traditional desktops/laptops to mobiles and tablets, advertisers have been reluctant to pay more for mobile ads.

In Q4 2013, paid-click volume increased by 31%, but the average cost-per-click fell by 11%.

Earlier this week, Facebook reported a 63% increase in earnings to $2.6 billion in Q4 2013, with profits rocketing to $523 million compared to $64 million in same quarter in 2012.

Yahoo, on the other hand, reported its fourth consecutive quarterly decline. Revenue dropped to $1.266 billion in the last quarter of 2013 compared to $1.346 billion in Q4 2012.