Business news: Google stock wrinkle, Goldman Sachs settles charges, Best Buy hints of scandal

Published: Friday April 13, 2012/Business News Central   

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Google Proposes Changing Stock Structure to Maintain Its Control
Google Inc., the world’s largest Internet-search company, plans a new stock structure that gives the company more leeway in issuing shares, while letting management keep control over the direction of the business.
The stock change would create a new class of nonvoting shares that will be distributed to existing shareholders in what is effective a 2-for-1 stock split.Google announced the move as part of Google’s first-quarter financial results, which met or beat most analysts’ estimates, boosted by online-ad spending.
Google aims to prevent employee stock compensation and stock-based acquisitions from diluting the voting power of its founders. The Mountain View, California-based company wants the flexibility to be able to make long-term investments, using its shares, without the risk of losing control.
“Day-to-day dilution from routine equity-based employee compensation and other possible dilution, such as stock-based acquisitions, will likely undermine this dual-class structure and our aspirations for Google over the very long term,” Chief Executive Officer Larry Page and co-founder Sergey Brin said today in a statement posted online. “We have put our hearts into Google and hope to do so for many more years to come. So we want to ensure that our corporate structure can sustain these efforts and our desire to improve the world.”
First-quarter profit, excluding certain costs, was $10.08 a share, the company said on its website. Analysts had projected $9.64 on average, according to data compiled by Bloomberg. Excluding revenue passed on to partner sites, sales rose to $8.14 billion, matching estimates.
Page, who became CEO a year ago, has pushed Google deeper into display advertising and mobile services. This year the company will account for 16.5 percent of the U.S. market for display ads, which include banners and videos, according to EMarketer Inc. By next year, Google is projected to grab almost 20 percent, unseating Facebook Inc. as the market leader.
“The viability of Google is still very, very strong,” said Ron Josey, an analyst at ThinkEquity LLC in New York. He recommends buying the stock, which he doesn’t own himself. “There’s still a lot of room for growth across its multiple businesses.”
Google’s shares were little changed in late trading after the announcement. They had risen 2.4 percent to $651.01 at the close in New York.
While the stock proposal will be subject to a vote at Google’s annual meeting on June 21, Page, Brin and Chairman Eric Schmidt control the majority of voting power.
“We expect it to pass,” David Drummond, Google’s chief legal officer, said in the statement.
Google still gets most of its revenue from Internet search ads -- the text links that appear in query results. The average cost per click declined 12 percent in the first quarter after falling 8 percent in the fourth quarter. The number of paid clicks rose about 39 percent.
“The cost per click is worse than expected, but that looks like it was made up for by very strong paid click,” said Clay Moran, an analyst at Benchmark Co. in Delray Beach, Florida. He has a hold rating on the stock, which he doesn’t own. “There was good growth in revenue.”
The company posted first-quarter net income of $2.89 billion, or $8.75 a share, compared with $1.8 billion, or $5.51 a share, a year earlier.
Mobile search ads have become a bigger piece of Google’s business. Companies will probably commit 23 percent of their search-based ad spending to mobile devices by the end of this year, according to Marin Software, which helps manage about $3.5 billion annually in online ads. That’s up from 8.7 percent at the end of last year.