Google Reports Mixed Q1 Earnings; Declares "Effective" 2 for 1 Stock Split
Google, Inc. (NASDAQ: GOOG) released its fiscal first-quarter earnings results after the closing bell on Thursday. On a GAAP basis, the company reported net income of $2.89 billion or $8.75 per share, versus $1.80 billion or $5.51 per share, in the year ago period.
On a non-GAAP basis, which is comparable to analysts' consensus, Google reported net income of $3.33 billion or $10.08 per share, compared to $2.64 billion or $8.08 per share, in last year's corresponding quarter. This compared to Wall Street analysts' consensus EPS estimates of $9.65 per share.
Revenues for the quarter came in at $10.65 billion, which represented a 24% increase over the $8.58 billion that the company reported in the first quarter of 2011.
After backing out traffic acquisition costs (TAC), revenues came in at $8.14 billion which just missed Wall Street expectations of $8.15 billion. Traffic acquisition costs rose to $2.51 billion in Q1 compared to TAC of $2.04 billion in the year ago quarter.
In Thursday's after hours trading session, GOOG shares were trading roughly 1% higher at $657.44.
Google also announced that its Board of Directors had unanimously approved a stock dividend proposal. Under the plan, the company will effectively execute a 2 for 1 stock split by creating a "new class of non-voting capital stock," which will be listed on the Nasdaq. The proposal is designed to allow the company to preserve the company's long-term governance structure while simultaneously satisfying shareholder calls for a stock split.
In a statement, Google founders Larry Page and Sergey Brin explained the reasoning behind the move:
These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before. It's effectively a two-for-one stock split—something many of our investors have long asked us for. These non-voting shares will be available for corporate uses, like equity-based employee compensation, that might otherwise dilute our governance structure.
We recognize that some people, particularly those who opposed this structure at the start, won't support this change—and we understand that other companies have been very successful with more traditional governance models. But after careful consideration with our board of directors, we have decided that maintaining this founder-led approach is in the best interests of Google, our shareholders and our users. Having the flexibility to use stock without diluting our structure will help ensure we are set up for success for decades to come.
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