The Wall Street Journal
predicts that Google's unstoppable earnings engine may soon hit a stop. But not because of its advertising system--that's still unstoppable; rather, the company's
interest income, which is the money Google makes from investing its nearly $10 billion in cash in government securities and other assets that bear interest, isn't likely to grow as much as last year.
Savvy investments years ago in Internet startups like the Chinese search engine Baidu.com, which later became a billion-dollar company itself--as well as a second stock offering in
April--have raised billions for the search giant.
This isn't to say that Google's interest income isn't significant. Third-quarter, the search giant raised 20 cents per share from its
interest income alone, which meant that per-share earnings would have been 63.8 percent rather than the actual 78.8 percent. Nevertheless, this is lower than interest income generated from the first
nine months of the year overall--which at $290.3 million, was five times greater than last year.
In the current quarter, WSJ
says those year-over-year interest comparisons will be
tough to match; the paper estimates that Google will reap $115 million from interest income, (just) 68 percent higher than the fourth quarter last year--a far cry from the quadrupling of previous
quarters in '06. Also keep in mind that Google's YouTube acquisition will be included in its results for the first time this quarter
Read the whole story at The Wall Street Journal (subscription required) »