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Solid Q1 results set stage for Google's Page

Co-founder Larry Page takes over following a quarter with 27 percent revenue growth

Google reported solid growth in the first quarter, just as co-founder Larry Page prepares to usher in a new chapter in the company's history.

The search giant's revenue hit US$8.58 billion for the quarter ending March 31, a 27 percent increase compared to the first quarter last year. Subtracting commissions and fees paid to its advertising network and other partners, revenue was $6.54 billion.

Net income in the quarter was $2.30 billion, or $7.04 per share, compared to $1.96 billion, or $6.06, in the same period in 2010, using generally accepted accounting principles. On a non-GAAP basis, net income was $2.64 billion, or $8.08, compared to $2.18 billion or $6.76 last year.

Analysts polled by Thomson Reuters were expecting revenue without commissions of $6.32 billion and non-GAAP earnings of $8.11.

Google-owned sites generated revenue of $5.88 billion in the quarter and partner sites generated revenue, through AdSense programs, of $2.43 billion. Revenue from outside the U.S. represented 53 percent of total revenue, up from 52 percent in the fourth quarter of 2010 but the same as the first quarter last year.

Earlier this year Google announced that Larry Page, the company's co-founder, would become CEO, taking over for Eric Schmidt, who would become executive chairman. The change took effect April 4, so the new leadership doesn't impact first-quarter results.

Page did not participate in a conference call with analysts to discuss the results. But that didn't stop analysts from asking questions of other executives about his plans and priorities.

Even though Page has only been at the helm for a little more than a week, he's already reportedly made some changes that onlookers are curious about.

For example, a number of analysts asked questions about Google's social strategy, apparently based on reports that Page had prioritized adding social-networking capabilities to the company's offerings. The executives sought to downplay the emphasis on social, with Patrick Pichette, chief financial officer, saying it is one of several areas the company focuses on, including mobile, commerce and enterprise services.

But Pichette appeared to confirm a report published last week in Business Insider, which pointed to an internal Google memo that said a portion of employee bonuses this year would be tied to the success of Google's social strategy.

"It's an internal matter," Pichette said, when asked about the policy. "We wanted to signal to employees that social is worth investing in; that's why we made the decision. But I wouldn't comment further on that."

He said changes to come from Page won't be dramatic. "Our company position has not changed. Google is a technology company focused on users. We are looking for products that can affect billions of people," Pichette said.

The executives did not shed any additional light on the impending departure of Jonathan Rosenberg, senior vice president of product management and a key figure at Google. But they did express regret at his plans to leave the company. "Jonathan's passion for our products is legendary at Google," Pichette said.

Page has already begun executing a reorganization intended to reduce the number of decision makers, Pichette said. Previously, each product was led by three people. If it made sense for two products to work better together, six leaders would be involved in making relevant decisions. "So we decided for every core product, one person is the final arbiter and decision maker," he said. The company hopes the change will help it move faster.

The executives highlighted the success of the Chrome browser and the Android mobile operating system, discussing expectations for both products to boost advertising revenue.

The company is now activating 350,000 Android devices daily, said Jeff Huber, senior vice president of commerce and local. Traffic to Google from mobile phones is up 500 percent in the past two years, he said.

While Huber said he couldn't quantify the value of a mobile user to Google, he said the company has high hopes. "If you look at the investments we're making and the focus of the organization, it's something we're very excited about," he said. "There's great potential there."

As many as 120 million people use the Chrome browser every day, he said.

The company has seen 30 percent growth quarter over quarter in Chrome use, said Nikesh Arora, chief business officer at Google. "The lifetime value of a Chrome user is phenomenal," he said.

That's because in the Chrome browser, the address bar is also a search box. "From a tactical perspective, everyone who uses Chrome is a guaranteed, locked-in user," Pichette said.

Google intends to continue to invest in aggressively growing its business, and that includes maintaining its rapid pace of hiring. It hired 1,900 people during the quarter, putting it on track to make 2011 its biggest hiring year yet, Huber said.


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