Google has done it again

Shares of Google (GOOG) has once again rose into an all time high today despite the general selling mood in the markets, Google shares topped 650$ for the first time ever, as it reported its quarterly results yesterday after the markets closed.

As a company that regularly beats Wall Street's earnings estimates, Google needed to blow away expectations on Oct. 18 to impress investors who have propelled the stock to record highs in recent days in anticipation of yet another blockbuster quarterly announcement. Anything less and investors would sell off the stock as they had in past quarters when Google just met or narrowly exceeded their projections.

Google did not disappoint. The search-advertising giant said third-quarter net revenue rose 61%, to $3.01 billion, a number that takes into account the amount Google pays Web site owners to put ads on their pages. That soundly beat analysts' average estimate for sales of $2.9 billion. Not counting the amount of stock awarded to employees, earnings per share rose to $3.91, beating forecasts of $3.78 a share. "We had a very strong quarter across the board," said Chief Financial Officer George Reyes.

Google owes its growth mainly to its dominant share of the online advertising market. Google captures roughly 32% of the $21.4 billion in U.S. advertising spending, according to an Oct. 16 report by research firm eMarketer. Google is especially adept at search advertising, which comprises more than 40% of the U.S. online advertising market.

Now Google is racing to gain a larger slice of other forms of online advertising, including display advertising, the term given to ads that run in a fixed spot on a Web page. That's why Google agreed to acquire ad network DoubleClick for $3.1 billion
earlier this year.

Yet a Few seemed worried about the company's growing expense line, mostly stemming from a hiring binge that saw more than 2,000 new employees added during the quarter.

"Half the company has been hired in the last 12 months. That's chaotic," says Jordan Rohan, an analyst at RBC Capital Markets, in an interview with CNET News.com. "The new employees find it difficult to figure out how to get things done. It's not a normal company."

During the call, several analysts posed pointed questions about Google's decision to hire an additional 2,100 employees during the quarter. Google blamed a less-than-amazing performance last July in part on hiring more aggressively than it had initially planned (BusinessWeek, 7/20/07). Chief Executive Eric Schmidt tried to allay concerns, saying, "this is an area where we need to spend more time and focus on what is the appropriate rate…We are paying a lot of attention to head count."

"We see Google as strategically positioned so far ahead of competitors that it can comfortably slow expansion and still outpace others," wrote Rob Sanderson of American Technology Research in a report Friday.
Sanderson boosted his price target on Google shares to $815 from $685, noting that "end markets remain very strong and under-penetrated, especially internationally.

What about that Google phone?

One of the key markets Google will focus more on in the future is mobile communications. Schmidt said that search queries through Google on phones are growing faster than those on computers, though they still represent a small percentage of the total.

"The mobile story is a very strong one," Schmidt said.

Schmidt indirectly addressed recent reports that the company is developing a software infrastructure, or platform, for mobile phones.

While new platforms come out "all the time," Schmidt said, "we want to make sure that Google and its technology is a part of each and every one of those platforms."
Google co-founder Larry Page said the company has no desperate need to develop its own mobile software platform. In addition, it has no pressing need "to have to bid to win" valuable wireless spectrum that is slated for auction in January, Page said. Google has indicated it may participate in the auction.

I guess we ll' just have to wait and see, meanwhile check out our thoughts on Google's cell phone project.