Google shares jump 17% on strong earnings

By Charley Blaine and Elizabeth Strott

Google (GOOG, news, msgs) shares jumped more than 17% to nearly $530 in after-hours trading this afternoon after the company startled Wall Street with much-better-than-expected first-quarter earnings.

Wall Street had been labeling the Internet search company as a maturing company based on several surveys that suggested that growth in clicks to paid advertising was slowing down. And there was worry about how badly the company might be hurt by a recession.

Instead, on a day when stocks finished flat, Google said it had earned $4.84 a share before one-time items, up from $4.53 a year ago. Revenue was up 41% to $5.19 billion. Net income was up 30% to $1.3 billion.

The stock shot up as much as $80 in after-hours trading before ending the after-hours session at $525.96, up 17%.

Google had closed at $449.54 in regular Nasdaq trading today, down 1.2%, and had not traded above $500 since Feb. 22, when it closed at $507.80.

"It's clear to us that we're well-positioned for 2008 and beyond, regardless of the business environment that we find ourselves surrounded by," CEO Eric Schmidt said on a conference call with analysts and investors.

One reason for the optimism: Google's international business is growing rapidly and hit $2.65 billion in the quarter. It now represents about 51% of total revenue.

But about $202 million, or 8.5%, of non-U.S. revenue was attributable to the falling dollar.

"I was expecting them to fall short," Jerome Dodson, a portfolio manager at Parnassus Investments in San Francisco, told Bloomberg News. "People said, 'Google can't keep defying the laws of gravity,' but it looks like Google is flying high again."

The earnings report certainly will give technology stocks a big boost Friday and may well give support to the stock market overall, which was edgy ahead both Google's earnings and the earnings report that Citigroup (C, news, msgs) will release before Friday's open.

Google's big gain had a huge impact on founders Larry Page and Sergey Brin. The value of their stakes in the company jumped by some $2.2 billion each in less than an hour. Page owns 2.91 million Google shares, which jumped in value from $13.1 billion to $15.3 billion. Brin's 2.86 million shares jumped in value from $12.9 billion to $15.1 billion.

The report also resulted in an 8.4% decline in shares of comScore (SCOR, news, msgs) to $21.60. ComScore's The traffic analysis firm had been pushing the idea that growth in Google's paid clicks had been slowing. Since the slowdown wasn't apparent in today's report, many investors concluded that the data was suspect.

The Google report came after stocks ended basically flat on the day. The Dow Jones industrials were up 1 point to 12,620, and the Standard & Poor's 500 Index gained a point to 1,366. The Nasdaq Composite Index was down 8 points to 2,342.

While Google was soaring in the after-hours market, rival Yahoo (YHOO, news, msgs) was up 1.6% to $28.47 after falling 1% in regular trading to $28.03. That suggests that investors don't believe Google's results will give Yahoo more leverage in its negotiations with Microsoft (MSFT, news, msgs).

Microsoft, the publisher of MSN Money, offered $44 billion for Yahoo on Jan. 31. Microsoft was up 1.1% to $29.55 in after-hours trading. The stock had closed up 0.9% to $29.22 in regular Nasdaq trading.

IBM's news doesn't give the market much lift

There had been hopes the market would head higher after IBM Corp.'s (IBM, news, msgs) big earnings report late Wednesday, and IBM was up 2.2% to $123.08. The company's report came Wednesday after a big rally that saw the Dow jump 257 points.

But investors were unhappy today with pharmaceutical giant Pfizer (PFE, news, msgs), down 3.3% to $20.40, the worst performer among the 30 Dow stocks. Pfizer reported that sales of Lipitor, its flagship drug, were down 7% in the quarter.

Another problem stock: eBay Inc. (EBAY, news, msgs), down 3.5% to $31.01, because investors were concerned that the company was showing little growth in its domestic auction business.

And materials stocks such as Monsanto (MON, news, msgs) and Potash of Saskatchewan (POT, news, msgs) were down sharply after big run-ups in recent weeks.

Monsanto was down 3.2% to $127.34. Potash was off 2% to $194.55.

Looking for a bright spot? Try financial stocks. Merrill Lynch (MER, news, msgs) was up 4% to $46.71 after losing nearly $2 billion in the first quarter and announcing 2,900 new job cuts that will boost layoffs for 2008 to 4,000 by the end of the year. The Amex Securities Broker/Dealer Index ($XBD.X) was up 2.4% to nearly 160.

Citigroup, meanwhile, was up 2.5% to $24.03 and was the best Dow performer on the day, followed by IBM. JPMorgan Chase (JPM, news, msgs) was up slightly at $45.12. Seventeen of the 30 Dow stocks were higher on the day, along with 245 S&P 500 stocks and 35 of the stocks in the Nasdaq-100 Index ($NDX.X). The Nasdaq-100 finished down 6 points to 1,841.

Energy prices -- New York close

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$114.86	$114.93	-$0.07	13.07%	19.67%
Heating oil (per gallon)	$3.2674	$3.2830	-$0.0156	7.16%	23.33%
Natural gas (per million BTU)	$10.3830	$10.4330	-$0.0500	2.79%	38.75%
Unleaded gasoline (per gallon)	$2.9578	$2.9390	$0.0188	13.05%	18.75%

Merrill reports another loss

Merrill Lynch this morning reported its third quarterly loss in a row.

Merrill lost $1.96 billion, or $2.19 per share, down from a profit of $2.11 billion, or $2.26 per share, in the first quarter last year. Analysts had been looking for a loss of $1.99 per share.

Revenue plunged 69% to $2.93 billion, also missing The Street's expectation of $3.7 billion.

• MSN's Stock Challenge: Win $15,000!

Merrill's write-downs were a big question for many analysts. Some reports had anticipated that Merrill would write down an additional $9 billion on bad mortgage bets and leveraged loans, but the company said the write-down was $6.6 billion. Merrill Lynch has written off $30 billion in assets from the subprime-mortgage mess.

"Despite this quarter's loss, Merrill Lynch's underlying businesses produced solid results in a difficult market environment," said Chief Executive Officer John Thain. Merrill may sell preferred shares to raise capital, he added.

Merrill's results were "better than I had expected," analyst Dick Bove of Punk Ziegel told CNBC this morning. "When you take a look at the different business lines of the company, certainly none of them has done extraordinarily well in the quarter, but you wouldn't expect them to, given the condition of the market."

The company "is maintaining a relatively good position," Bove said. "I would be very wary about becoming too negative about what you're seeing in this particular quarter."

• Get free, real-time stock quotes on MSN Money

Another analyst was less optimistic. "We are concerned about failing hedges and resulting growing net exposure to some troubled asset classes," Standard & Poor's analyst Matt Albrecht wrote in a note to investors this morning.

Merrill also said it will cut the new job cuts will come in its global-markets and investment-banking divisions.

United Technologies' earnings jump

Another Dow stock had a great first-quarter-earnings report today.

United Technologies (UTX, news, msgs) this morning reported earnings of $1 billion, or $1.03 per share -- up 26% from the $819 million, or 82 cents per share, the company earned a year ago.

Earnings topped analysts' expectations of $1.01 per share.

Revenue also rose, climbing 12% to $13.7 billion in the quarter.

Shares were down 2.5%, however, to $70.79 after the company said it was concerned about "early signs of moderating growth in the U.S."

United Technologies makes products ranging from Sikorsky helicopters to Carrier air conditioners.

Oil drifts back

Crude oil fell back slightly on the day after topping $115 a barrel again. At the close, crude was down 7 cents to $114.86 a barrel.

The break comes after a big run-up. Crude closed at $114.93 a barrel on Wednesday, its third new closing high in as many days. Prices jumped again after the Energy Department reported an unexpected decline in oil inventories last week. To make matters worse, refinery capacity was at the lowest level since October 2005, after Hurricanes Katrina and Rita hit the Gulf Coast.

• Readers vent: 'Gas prices are killing me!'

Oil's recent surge is partly due to the weak dollar. Crude prices are denominated in dollars and generally rise when the dollar declines. A weak dollar makes oil less expensive to buyers holding foreign currencies and hits oil-producing companies' profits, forcing them to boost prices.

Oil is up more than 80% over the past year.

Continental reports a loss; Southwest shows a profit

Surging oil prices slammed Continental Airlines (CAL, news, msgs) in the first quarter. The airline this morning reported a loss of $80 million, or 81 cents per share, down from a profit of $22 million, or 21 cents per share, last year. Excluding a gain, Continental lost 86 cents per share, better than the consensus estimate of a 93-cent loss.

Continental blamed high fuel prices for the loss and, as a result, said it would reduce domestic capacity by 5%.

Shares in the airline were up 1.3% to $21.11 today.

Separately, Southwest Airlines (LUV, news, msgs) said it earned $34 million or 5 cents a share in the quarter. Like Continental, the airline blamed the profit drop on higher fuel costs. It said it would cut its plans to buy 28 new planes to 14 and may scrap that idea as well, CEO Gary Kelly told Bloomberg. The airline will retire 22 older planes.

Pfizer's profit drops

Drug giant Pfizer this morning reported an 18% decline in profit in the first quarter, after two drugs were hit by generic competitors.

Pfizer earned $2.78 billion, or 41 cents per share, down from $3.39 billion, or 48 cents per share, in the same quarter last year. Excluding items, Pfizer earned 61 cents per share, missing analysts' expectations by a nickel.

Revenue dipped 5% to $11.8 billion. Sales of its Lipitor cholesterol drug fell 7% to $3.1 billion.

"I'm not sure any real progress can happen this year," Linda Bannister, an analyst with Edward Jones, told Bloomberg News. "We need to continue to see progression in Pfizer's pipeline, and as it continues to progress, we'll get a sense of how many potential blockbusters there are. I'm not sure that will happen this year."

Meanwhile, rival Eli Lilly (LLY, news, msgs) late Wednesday said it will cut up to 500 jobs, mostly in its manufacturing business. Lilly said it is offering a voluntary exit program to 2,000 workers.

Lilly employs 40,300 people around the world.

Profit rises at eBay, but so do doubts

Online auctioneer eBay late Wednesday reported a 22% increase in first-quarter earnings. The company earned $459.7 million, or 34 cents per share, up from $377.2 million, or 27 cents per share, in the first quarter last year. Excluding charges, eBay earned 42 cents per share, 3 cents ahead of analysts' expectations.

Sales jumped 24% to $2.19 billion, topping The Street's estimate of $2.08 billion.

Gross merchandise volume -- the total dollar amount for items sold on the site -- rose 12% to $16.04 billion from last year but fell 14% from the previous quarter. The number of listings on eBay was flat, lower than the 10% growth rate in the same quarter a year ago.

The company boosted its second-quarter guidance to between 39 cents and 41 cents per share; Wall Street expects 39 cents per share.

"While we are raising our full-year outlook, we still remain cautious about the economic environment," CEO Bob Swan said to analysts on a conference call late Wednesday.

Short hits from the markets -- 4 p.m.

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.210%	1.115%	0.095	-10.37%	-61.46%
5-year Treasury note yield	2.897%	2.820%	0.077	14.28%	-16.15%
10-year Treasury note yield	3.729%	3.696%	0.033	7.59%	-7.58%
30-year Treasury bond yield	4.524%	4.525%	-0.001	4.12%	1.46%
Currencies
U.S. Dollar Index	71.925	71.645	0.280	-0.33%	-6.22%
British pound in dollars	$1.9904	$1.9736	0.0169	0.34%	0.06%
Dollar in British pounds	£0.5024	£0.5067	-0.0043	-0.34%	-0.06%
Euro in dollars	1.5918	1.5946	-0.0028	1.07%	8.91%
Dollar in euros	€ 0.6282	€ 0.6271	0.0011	-1.06%	-8.18%
Dollar in yen	102.51	101.76	0.75	2.71%	-8.35%
Canadian dollar in U.S. dollars	$0.990	$1.000	-$0.0101	1.23%	-0.33%
U.S. dollar in Canadian dollars	$1.011	$1.000	$0.0109	-1.22%	0.33%
Commodities
Gold	$942.90	$948.30	-$5.40	1.72%	12.52%
Copper	$3.9120	$3.9955	-$0.08	-0.82%	28.64%
Silver	$18.3050	$18.3250	-$0.02	3.48%	22.69%
Corn	$6.0425	$6.0350	$0.01	6.52%	32.66%
Crude oil (NYMEX) (per barrel)	$114.86	$114.93	-$0.07	4.29%	19.67%