updated 10/21/2004 7:51:52 PM ET 2004-10-21T23:51:52

Google Inc. exceeded analyst expectations in its first quarterly earnings report as a public company, propelled by a continued surge in online advertising distributed by its Internet-leading search engine.

The Mountain View-based company said Thursday that it earned $52 million, or 19 cents per share, during the three months ended in September. That compared to $20.4 million, or 8 cents per share, at the same time last year.

The results marked Google’s first financial review since completing its closely watched initial public offering in August. The profit included one-time charges to account for stock-based compensation and a previously announced settlement of a patent dispute with rival Yahoo Inc.

Without those charges, Google told analysts during a conference call that it would have earned 70 cents per share.

That was well above the mean estimate of 56 cents per share among analysts polled by Thomson First Call. Analyst forecasts had varied widely because Google hadn’t provided any previous financial outlook and management has vowed to continue that policy.

“Our business is working very well,” Google CEO Eric Schmidt said during an interview Thursday. “There had been a lot of concern that we would go public and our employees would become distracted. But we did the IPO and then came right back to work.”

Caris & Co. analyst David Garrity was pleased with Google’s performance. “Companies are supposed to blow the numbers away the first quarter after an IPO and they did that, so hats off to them,” he said.

Google released its results after the stock market closed Thursday. The company’s shares climbed $8.89 to finish at $149.38 on the Nasdaq Stock Market, then soared another 8 percent, or $11.92, in extended trading.

Based on the latest price, Google’s market value stands at $44 billion just six years after the company’s inception. Co-founders Larry Page and Sergey Brin, who began developing Google’s search engine in a Stanford University dorm room, are now worth roughly $6 billion apiece.

“This has probably become the ultimate momentum stock,” said Janco Partners analyst Martin Pyykkonen, who believes Google’s shares have become too expensive. “Still, you have to give them a high five. It was a very strong quarter.”

Wall Street’s lofty assessment of Google stems from the company’s ability to turn its immensely popular search engine into a moneymaking machine that churns out text-based ad links related to the content displayed on a Web page.

Google’s revenue for the third quarter totaled $805.9 million, up from $393.3 million last year. Google generated most of the revenue — $411.7 million — through ads displayed on company-owned sites. That’s an important factor because Google doesn’t have to share the money with other advertising partners.

Subtracting the commissions Google paid to deliver ads to other Web sites, the company’s third-quarter revenue would have been $503 million, topping the mean analyst estimate of $456 million, according to First Call.

“People are shifting their sales dollars to Google and we believe (the trend) is just in its infancy,” Schmidt said.

Google lost some of its luster during an unconventional auction-style IPO after a series of hitches raised questions about management. Prospective investors also rebelled against the company’s attempt to fetch a price as high as $135 per share.

Prodded by the backlash, Google lowered the IPO price to $85 per share. Since it started trading, the stock has climbed to heights that has surprised even the most bullish analysts amid a renewed buzz about one of the best-known names on the Internet.

The rapid run-up in Google’s stock increased the pressure to deliver a strong quarter, particularly after online rival Yahoo Inc. announced a big earnings gain earlier this month.

Google’s latest quarter shows the company is growing far faster than Sunnyvale-based Yahoo, said American Technology Research analyst Mark Mahaney. While Google’s revenue doubled from last year, Yahoo’s climbed 33 percent, excluding gains from an acquisition, Mahaney said. “The fundamentals look very impressive for Google.”

Although excited about the company’s achievements so far, Schmidt is trying to keep Google’s nearly 2,700 employees on an even keel. Many of the workers hold options on company stock worth millions of dollars.

“We have really tried to ignore the stock price,” Schmidt said. “I have tried to delete it from our focus.”

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