Google Balloon Pops
By Reuters  

For the first time in its charmed, short history, Google disappoints investors.

SAN FRANCISCO, Jan 31 - Google Inc. reported a disappointing quarterly profit and spending plans that startled some Wall Street analysts, sending its shares down 8 percent on Thursday.

The world's top Internet company said it expected to continue to make "significant capital expenditures" after spending $678 million in the fourth quarter on data centers, servers and other equipment. Citigroup had warned that spending above $600 million would be a negative sign.

Revenue was slightly shy of Wall Street targets, and the level of payments to sites that show Google ads, called traffic acquisition costs, also surprised some.

"The traffic acquisition costs came in much higher than expected and suggests that some of the big deals with their partners may have been renegotiated with higher terms for the partners," said Jordan Rohan, an analyst at RBC Capital.

The report comes as investors watch to see how a U.S. economic slowdown will hit Google, which generates nearly all of its revenue from advertising.

"There was a slight softness in revenue which perhaps portends softness going forward due to the ... U.S. economy," said Clayton Moran of Stanford Group.

The results were disappointing given the Web search leader's track record of beating expectations, he added.

Fourth-quarter net income rose to $1.21 billion, or $3.79 per diluted share, from $1.03 billion, or $3.29 per diluted share, in the year-earlier quarter.

Excluding special items, earnings per share amounted to $4.43, falling short of analysts' average forecast of $4.47, according to Reuters Estimates.

Revenue rose 51 percent to $4.827 billion. Analysts, on average, had predicted revenue of $4.83 billion, with estimates ranging from $4.67 billion to $5.10 billion.

Google shares traded at $520.48 in extended trading, down from their Nasdaq close of $564.30.

(By By Eric Auchard, Additional reporting by Michele Gershberg in New York; Editing by Braden Reddall)