Google’s reports blockbuster Q4 but modest FY09 growth

Google (NASDAQ: GOOG) raked in $6.7 billion in revenue in its fiscal fourth quarter, which ended Dec. 31, and finished 2009 with $23.7 billion in revenue. Its fourth quarter was a whopping 17% increase over Q4 2008 yet its year-end came in at a modest, single digit 8% increase.

Given that Google’s stock trades at the astounding price of about $550 a share (as if it were the hottest growth stock on the planet) it’s not surprising that Google’s press release downplayed its year-over-year growth. The press release didn’t even mention its fiscal year 2009 in its highlights section, presenting that material strictly in the tables.

Although Google beat analysts expectations for the quarter, the news wasn’t all rosy, as the Wall Street Journal pointed out. Costs per click rose 5% from a year earlier and 2% from the previous quarter.

As with 2008, 97% of Google’s revenue came from advertising, with 67% coming from ads on its own Web sites and 30% coming from other’s Web sites through its AdSense program. A mere 3% was generated from licensing revenues on products like Google Apps and enterprise search products.

As far as the enterprise is concerned, despite many highly publicized wins (like Los Angeles and New Zealand), it’s a market that still hasn’t amounted to much for the search giant. By my calculations, Google earned only $201 million from enterprise IT departments. Compare this to arch rival Microsoft, which earned $58.4 billion for its fiscal 2009 (that ended June 30) of which $3.1 billion was from advertising. To be fair, that $3.1 billion represented a 13% decline over 2008 and the unit racked up $2.3 billion loss. Too bad for Microsoft, but my overall point is that fundamentally, the enterprise is to Google’s bottom line what advertising is to Microsoft’s — fairly insignificant.

With all the hullabaloo over Google threatening to pull its business interests out of China, you might expect to see some mention of what that business is worth to Google’s stockholders in this financial report. But you would be wrong. Google says that revenues from outside of the United States comprises roughly half of its fourth quarter income, which is a percentage that’s been holding steady for a while. It names only one country, the United Kingdom, in the report. Google says the UK comprises 12% of revenues (or roughly half of all foreign revenues). This is likely Google’s biggest foreign market. The word China is not mentioned.

Google invested $2.84 billion in research and development in 2009, which is slightly more, but only by a rounding error, than it invested in 2008, at $2.79 billion. It is hard to see what returns Google is getting on that investment, at least yet, although we know that Google hopes to have a payoff with up-and-coming products like Android and the Google Nexus One phone, and Google Chrome OS devices expected in late 2010. Google also patents a lot of technology each year, mostly relating to improving or expand its bread-and-butter item, advertising.

Thanks to a crummy economy for most of 2009, Google says it spent only $108 million in cash on acquisitions this year, compared to $3.3 billion in 2008. Google purchased a mere six companies in 2009, all of them after August. It’s largest buy was a stock swap deal valued at $750 million for AdMob. When your stock trades as high as Google’s does, you don’t need to toss a lot of cash in to sweeten a deal. Other acquisition highlights include the purchase of Gizmo5 for $30,000 in November. It bought reCAPTCHA in September for an undisclosed sum. A month earlier it bought video compression vendor On2 Technologies for $106.5 million

Please visit the Google Subnet home page for more news, blogs and podcasts. Sign up for the weekly Google newsletter. (Click on News/Google News Alert.) More blog posts from Google Subnet:

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