San Francisco, October 19, 2007 - The financial reports speak that the gap between Google and its rivals is getting larger. The results show that Google is growing roughly twice as fast as the overall online advertising market and that itself is booming.

The Internet search and advertising giant, whose shares have risen more than $100 in the last month, said net income in the third quarter surged 46 percent compared with the period a year earlier. Sales rose 57 percent, topping Wall Street’s already bullish forecasts.

“It was a pretty good quarter,” said Douglas Anmuth, an analyst with Lehman Brothers. “The gap is widening as they continue to dramatically outperform competitors.” This week, Google’s rival Yahoo said its revenues had grown just 12 percent.

In a conference call with analysts, Google executives said the company’s business was strong in the United States and overseas.

“We are very pleased with such strong results in what is seasonally one of our weaker quarters,” said Eric E. Schmidt, the chief executive. “It is obvious to us that our model continues to work very well.”

Google said its net income grew to $1.07 billion, or $3.38 a share, up from $733 million, or $2.36 a share, a year earlier. Net revenue rose to $4.23 billion. Excluding commissions paid to advertising partners, a widely followed measure of the company’s performance, revenue was $3.01 billion, about $70 million higher than analysts expected. Profit, excluding items like stock-based compensation, was $1.24 billion, or $3.91 a share, higher than the $3.78 a share forecast by analysts.

Surprisingly, Google, which this year had promised to slow its rate of hiring, in part to allay investor worries about rising expenses, added 2,130 employees this quarter, more than in previous quarters, to end the period with 15,916 employees.

Google executives said that about 1,000 of the new hires were recent college graduates, many of whom had accepted offers earlier in the year and began working in the quarter. About 300 more workers were added when Google completed the acquisition of the e-mail manager Postini.
“The numbers that you are seeing are essentially an overhang,” Mr. Schmidt said. “Going forward you should be comfortable that we are paying attention to the head count.”

That promise appeared to satisfy some analysts.

“Yes, they hired more people,” said Anthony Noto, an analyst with Goldman Sachs. But Mr. Noto said he was persuaded that any concerns about runaway growth had been put to rest.

Mr. Noto said Google executives seemed to calm worries about another possible expense: the $4.6 billion or more that Google said it might bid for a swath of wireless spectrum that the government is set to auction next year.

Google had been lobbying regulators to set rules requiring any network that uses the spectrum to be open to any phone and any software application. The Federal Communications Commission adopted those rules, but they are being challenged in court by Verizon Wireless.

During the call, Larry Page, a Google founder, said the company was happy with the “openness provisions” that were put in place by the F.C.C.

“I don’t think we feel like there is any desperate need for us to have to bid to win,” he said. “The money is not burning a hole in our pocket.”
In an interview after the conference call, Mr. Schmidt said Google had not ruled out a bid, either alone or with a partner.

“In August, I said that we would probably bid,” he said. That has not changed, Mr. Schmidt said. Then he added: “‘Probably’ is not the same as ‘will.’”

Google’s financial report follows a period in which the company’s shares have risen sharply, to a record of $641.41 a week ago, as many investors expect the company’s core advertising business to remain strong.

Full Story: http://www.nytimes.com/2007/10/19/technology/19google.html?th&emc=th