Profit rise at Google fails to cheer market

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Google has turned in a 35 percent rise in net second quarter profit, but the news has failed to impress a US market that is looking for better performance from technology stocks.

Shares in the company tumbled eight per cent to below $500 (£250), as Wall Street reacted badly to the figures, which fell short of analyst expectations.

The disappointing profit came as Google said online ad revenue held up well across sectors and world regions despite a weaker global economy that has tripped up rivals.

Officials pointed to problems managing its cash - now totalling $12.7 billion (£6.35 billion) - in the face of volatile interest rates, the cash drain of recent acquisitions such as YouTube and higher costs to hedge foreign currency risk as operations expand overseas.

"Traffic and revenue have held up well despite uncertain economic conditions, as everybody knows," said Google chief executive Eric Schmidt.

Second-quarter net profit rose to $1.25 billion (£625 million) from $925 million (£462.5 million) in the same quarter last year.

Gross turnover rose 39 per cent to $5.37 billion (£2.65 billion), matching the average of analysts' estimates.

Chief financial officer George Reyes cited lower yields on cash and lost interest on the $3.2 billion (£1.6 billion) in cash it shelled out in March for advertising technology company DoubleClick.

In the second quarter last year, Google similarly surprised analysts with disappointing earnings, but for different reasons. Operating expenses were exploding as the company was on a hiring spree.

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