Google 4Q results tarnished by AOL and Clearwire

Google, the internet search engine giant, has posted a fairly impressive set of financial results given the worsening economic environment.

4Q 2008 revenues were $5.7bn, an increase of 18 percent compared with 4Q 2007. Operating income was also up during 4Q 2008 at $2.15bn, or 38 percent of revenues. This compares to an operating income of $2.02bn, or 37 percent of revenues, in the third quarter of 2008.

Google’s bottom line took a hit, however, after taking a non-cash impairment charge of $1.09bn during 4Q 2008. This primarily relates to its equity investments in AOL and Clearwire, whose values were written down on Google’s books to the tune of $726m and $355m respectively.

Without the one-off impairment charges, Google would have posted net income of $1.62bn during 4Q 2008 ($1.56bn during 3Q 2008). As it was, the internet giant had to post a much smaller net income of $382m.

The write-down in Clearwire, the mobile WiMAX joint venture in the US, was widely expected following the slump in the company’s share price and previous write-downs on Clearwire made by other JV investors, including Intel.  Google had invested $500m in Clearwire when the WiMAX JV was formed in May 2008.

The impairment charges aside, Google managed 4Q 2008 quarter-on-quarter revenue increases in key business areas, such as Google Sites (up 22 percent) and Google Network (up 4 percent). The aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its AdSense partners, increased approximately 18 percent over 4Q 2007 and about 10 percent compared with 3Q 2008.

“Google performed well in the fourth quarter, despite an increasingly difficult economic environment. Search query growth was strong, revenues were up in most verticals, and we successfully contained costs,” said Eric Schmidt, CEO of Google, in a prepared statement. “It’s unclear how long the global downturn will last, but our focus remains on the long term, and we’ll continue to invest in Google’s core search and ads business as well as in strategic growth areas such as display, mobile, and enterprise.”