Google has reported a 61pc increase in its net income for the first three months of the year and announced plans to split its stock two for one “to preserve its leadership’s control” over the company in the long term.
The search engine said last night that it wants to issue a new class of stock to shareholders, but the new shares won’t have any voting power.
Under the plan, all current shareholder will get one share of the new Class C stock for each share they now own.
Google have claimed that investors have been asking for the split. Which is bad on three points:
1) Warren Buffet has warned against stock splits as it only generates profits for the banks involved- at shareholders expense;
2) Limiting democracy by withdrawing shareholders rights to executive contol;
3) Pro rata the shares- currently at $641 (£400)- are only 3 per cent higher than Apple Inc’s closing price yesterday of $622 (£388).
The new share plan came as Google said it earned £1.80 billion ($2.89 billion), or $8.75 per share, in the first quarter.
That’s an increase from £1.125 billion ($1.8 billion) or $5.51 per share last year.
Total revenue was £6.65 billion ($10.65 billion), up 24 per cent from £5.36 billion ($8.58bn).
After subtracting ad commissions, Google’s revenue totaled £5.08 billion ($8.14billion) in the latest quarter.
Google’s dependence on it’s Golden Egg- pay per click AdWords, was highlighted by a 39pc increase in the number of “paid clicks” but the prices of its search driven ads continued to decline. The so-called “cost-per-click” for these ads declined 12pc from the same time a year earlier.
Google’s report for the October-December quarter had been a disappointment, with earnings and revenue below analysts’ expectations.
A drop in search ad prices also spooked investors, who sent the stock down 8pc after the company issued its report in January.