Google Spreads Itself Thin: Fool by Numbers

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On Jan. 31, global search and advertising mogul Google (Nasdaq: GOOG) released earnings for the 2007 fiscal year, a period ended Dec. 31.

• Google missed the consensus earnings target for the fourth quarter by a mere $0.01 per diluted share. To put the magnitude of the miss into perspective, imagine that the company had done a 10-for-1 stock split to put the share price in the $50 range. The miss would then have been two-tenths of a cent, or a mere rounding error.
• As early Googlers vest their stock options and cash them in, share dilution is becoming a real issue here. The company has never bought and retired a share of its own stock, and it still doesn't have any repurchase authorizations from the board of directors.
• That cash account is growing mighty fat, and it could go a long way toward correcting that dilution issue -- if the mood strikes.
• There's change afoot in the online search market, now that Microsoft (Nasdaq: MSFT) has put up a bid for Yahoo! (Nasdaq: YHOO). Read all about it.

(Figures in millions, except per-share data.)

Income Statement Highlights

	FY 2007	FY 2006	Change
Sales	$16,594	$10,605	56.5%
Net Profit	$4,204	$3,077	36.6%
EPS	$13.29	$9.94	33.7%
Diluted Shares	316.2	309.5	2.2%

Get back to basics with the income statement.

Margin Checkup

	FY 2007	FY 2006	Change*
Gross Margin	59.9%	60.2%	(0.2)
Operating Margin	30.6%	33.5%	(2.8)
Net Margin	25.3%	29.0%	(3.7)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	FY 2007	FY 2006	Change
Cash + Short-Term Investments	$14,219	$11,244	26.5%
Accounts Receivable	$2,163	$1,322	63.5%

Liabilities	FY 2007	FY 2006	Change
Accounts Payable	$282	$211	33.6%
Long-Term Debt	$0	$0	N/A

The balance sheet reflects the company's health.

Cash Flow Highlights

	FY 2007	FY 2006	Change
Cash From Operations	$5,775	$3,581	61.3%
Capital Expenditures	$2,403	$1,903	26.3%
Free Cash Flow	$3,373	$1,678	101.0%
Owner Earnings	$2,769	$1,747	58.5%

Free cash flow is a Fool's best friend.

Competitive Context

	Market Cap	Trailing P/E Ratio	CAPS Rating (Out of 5)
Microsoft	$303,408	18.6	***
Google	$166,323	39.6	**
News Corp. (NYSE: NWS)	$59,290	18.6	***
eBay (Nasdaq: EBAY)	$35,354	106.2	***
Yahoo!	$27,811	40.4	**

Using the latest reported numbers from Capital IQ, a division of Standard & Poor's. Keep your partners close and the competition in your vest pocket.

Related Foolishness:

• Foolish Forecast: Google Will Come Back
• Google in 2010
• 6 Things to Watch For in 2008