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Google's Q4 earnings miss highlights Motorola woes

Summary: Fortunately for Google execs, Motorola won't be a question going forward. CEO Larry Page was already talking about Google sans Motorola's losses.

By Larry Dignan for Between the Lines | January 30, 2014 -- 21:29 GMT (13:29 PST)in

Google's fourth quarter earnings fell short of expectations, but at least it's clear why the company offloaded Motorola Mobility to Lenovo for $2.91 billion. Motorola Mobility's fourth quarter sales took a hit from a year ago and was clearly becoming a headache.

The search giant reported fourth quarter earnings of $3.38 billion, or $9.90 a share, on revenue of $16.86 billion including traffic acquisition costs. Google reported non-GAAP earnings of $12.01 a share for the fourth quarter. Wall Street was looking for earnings of $12.26 a share on a non-GAAP basis on revenue of $16.75 billion.

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Fourth quarter revenue excluding $3.31 billion in traffic acquisition costs was $13.5 billion.

Despite the launch of Moto X and what was supposed to be a strong smartphone quarter during the holidays, Google's Motorola unit struggled. Motorola reported fourth quarter revenue of $1.24 billion, down from $1.51 billion a year ago. Motorola reported an operating loss of $384 million in the fourth quarter. There's a disconnect between Google's revenue slide and the supplemental financials.

Fortunately for Google execs, Motorola won't be a question going forward. The rest of Google's business looks solid. Google CEO Larry Page was already talking about Google sans Motorola and said "standalone revenue was up 22 percent year on year."

On a conference call with analysts, Nikesh Arora, chief business officer, said performance advertising remains the mainstay of the company and he's optimistic that Google can hit all screens.

Arora said:

Performance advertising continues to be a main stay of our core business. We're seeing good growth as driven primarily by increased search activity across all screens, as driven by new measurement features and more sophisticated market ears lining their search and display advertising strategies.

Arora also added that Google's enterprise business continues to grow. CFO Patrick Pichette said that Google is continuing to invest in data centers. "Most of our capital expenditures right now are really driven by data center construction and machines that are actually driving both the core businesses of Google and (cloud services like Compute and App Engine).

Google site revenue was $10.55 billion, up 22 percent from the fourth quarter a year ago. Network revenue was $3.52 billion, up 3 percent from a year ago. Other revenue was $1.65 billion, up 99 percent from a year ago. International revenue was 56 percent of sales in the fourth quarter.

Other revenue includes content, apps as well as hardware such as Chromecast and Chromebooks.

Other points worth noting:

• Average cost-per-click, a key metric, fell 11 percent in the fourth quarter compared to a year ago.
• Paid clicks were up 31 percent in the fourth quarter compared to a year ago.
• Other cost of revenue, mostly manufacturing and inventory costs as well as data center expenses, was $4.13 billion, or 24 percent of revenue.
• Google had a whopping $58.72 billion in cash and equivalents at the end of the fourth quarter.
• There were 47,756 full-time employees (3,894 in Motorola Mobile) as of December 31.

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.