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Hot Ad Numbers Boost Google

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Why you should forget Motorola and be happy about Google's latest quarterly report.

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This is the fact that Google (NASDAQ:GOOG) really wants you to pay attention to in its quarterly earnings report, released after the close Thursday: The number of paid advertising clicks it served during the quarter was up a huge 31% year over year.

There are a couple of other numbers in there that it would rather you didn't get fussed about, but it's fair to say that there are mitigating factors for both of them:

1. The average price per click declined 11%.

That's a downside, if you can call it that, of the accelerating move to mobile Internet access, and Google's aggressive move into the mobile arena. Advertisers have so far been unwilling to pay as much for mobile ads as for the more time-tested online display ads.

But Google dominates the mobile Internet advertising business even more than it does online display advertising.

The latest figures from eMarketer estimated that Google had a 53.17% share of global mobile Internet ad revenue in 2013, a huge lead over all of its rivals. Facebook (NASDAQ:FB) is a distant second at 15.80%.

Google's global share across all platforms is about 30% of a market that reached $118 billion in 2013.

2. Google "missed" on revenue.

Overall, Google reported a "core" revenue increase of 22%, to $16.86 billion, over the same quarter in the previous year. Earnings came in at $12.01 a share, excluding one-time costs.

Analysts expected earnings of $12.20 per share on $16.75 billion in revenue, according to the consensus estimate compiled by Thomson/Reuters. (An average of estimates compiled by Bloomberg projected sales of $13.4 billion and profit of $12.25.)

Set aside any questions about whether the analysts just, shall we say, screwed up on one or both numbers.

Most of that alleged shortfall can be found in one unit. Motorola reported an operating loss of $384 million for the quarter, even worse than expected and double the losses of a year before.

Forget Motorola

Google investors don't have to think about that dud any more. The company announced the evening before its earnings call that it had agreed to sell the Motorola smartphone business to Lenovo (OTCMKTS:LNVGY) for $2.9 billion.

The sale is as embarrassing as it is necessary: Google paid $12.5 billion for Motorola in 2012.

At least it gets to keep about 22,000 of the mobile patents it got with the purchase, while about 2,000 others will go to Lenovo.

Since Google's Android mobile operating system already dominates the market, its desire to own the hardware never made sense to its investors, even while it seriously annoyed the manufacturers who adopted Android.

And here are some numbers that weren't included in Google's latest results: Its global share of the mobile phone market grew to almost 80% in 2013, from a share of about 68% in 2012, according to a report just released by the market research firm Canalys.

That's about 785 million phones shipped with Android installed on them.

So, the critics were right about this one. Google didn't need a handset business anyway.

It is still more than dabbling in hardware, through its Google Glass venture and its recent purchase of the smart-home gadget maker Nest.

"It is really about living with the user, supporting users across all the day, whether on a TV, mobile phone, desktop [or] wearable," Google Chief Business Officer Nikesh Arora said during the earnings call. "That is really the aim we are shooting for."

Not surprisingly, given the "Google missed" headlines, the stock waffled all over the place immediately after the earnings were released, settling up 4.15%, a gain of $47.11, to $1,182.50 in after-hours trading. The stock was up 3% during regular hours, mostly due to the Motorola news.

The company also announced its board of directors has approved a share distribution of Class C capital stock as a dividend for its investors. The dividend record date is set at March 27, and will be paid on April 2.

See also:

Why We Still Need Google's Nexus Brand

Tablet Demand Slows During Alleged Mobile Device Boom
No positions in stocks mentioned.
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