Google profits lifted by cost cuts

Internet giant Google has painted a mixed picture on trading after record quarterly profits were accompanied by a slowdown in revenues growth.

The US group said second-quarter profits rose 19% to $1.48bn after carrying out its first ever job cuts and slashing company investment.

However, shares in the firm fell in after-hours trading in New York amid confirmation of a slowdown in sales due to the global recession.

Revenues growth of 3% to $5.52bn marked Google’s second straight quarter of single-digit revenues growth. The figure had not fallen below a 30% gain until the final three months of last year.

Brigantine Advisors analyst Colin Gillis said: “They are pulling more levers than they have had to in the past and that’s a sign of a mature company. People don’t like that because Google is supposed to be a growth company.”

While the US recession is making it harder for Google to sell its online ads, chief executive Eric Schimdt said he does not expect the business climate to become any more challenging.

He added: “We’re not at the moment looking at that downward spiral we thought we might see six months ago.”

In the face of the recession and the strong dollar, Google trimmed general and administrative expenses by 23% and reduced its spending on capital projects by 80%.

Google ended the month with 19,786 employees, 378 fewer than at the end of March. The reduction is notable given that the company added more than 17,000 workers from the start of 2005 through to the end of last year.

The company announced this month that it is developing a new operating system for laptop computers in a move seen as a strong challenge to Microsoft’s dominance.

The new technology is being designed for those that “live on the web” and is initially aimed at netbooks, although it will eventually be used to power full sized desktops as well. It will run through its web browser, Chrome.