Google quarterly results fail to excite

By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Google's (GOOG.O) quarterly profit beat Wall Street expectations, but the weak economy and slump in advertising spending took a toll on revenue growth and the price of its search ads.

Shares of Google fell 3 percent after the results, which exceeded average forecasts but failed to live up to the heightened expectations of investors following Intel's (INTC.O) strong earnings earlier this week. Google shares have risen 4 percent since Intel's report on Tuesday.

"They did decently, but obviously it's not high enough for the Street," said Laxmi Poruri, an analyst at Primary Global Research.

Google's revenue in the second quarter rose 3 percent to $5.52 billion (3.36 billion pounds), compared with the average analyst forecast of $5.49 billion, according to Reuters Estimates.

Excluding traffic acquisition costs -- the portion of revenue that is shared with Google partners -- revenue was $4.07 billion.

"People were hoping they would see something around the $4.3 billion range," said Brigantine Advisors analyst Colin Gillis. "Google is changing from a topline growth story to an earnings expansion story."

Google, the largest U.S. Internet search engine, has weathered the global recession better than many of its rivals from Yahoo to Time Warner's (TWX.N) AOL, which have suffered declining revenue in recent quarters.

In a conference call on Thursday, Google executives said it was too early to tell when an economic recovery would emerge, but stressed their own business had begun to stabilise.