Investors living in the here and now had mixed feelings about Google’s first-quarter financial results, which it reported Thursday, sending Google’s share price up 2 percent in after-hours trading. The company’s revenue slightly missed analysts’ expectations. Its earnings exceeded expectations, but only because of an anomalous tax credit from the government for research and development. Without it, Google would have narrowly missed earnings expectations, too.

Still, Google’s results showed that whatever the threats, its core search business is still strong, even as desktop search and advertising slow because people are rapidly shifting their computer use to mobile devices, where Google struggles to make as much money.

Google is throwing itself into cutting-edge businesses, like glasses that connect to the Internet and cars that drive themselves. In a shift, Larry Page, Google’s chief executive, talked in a conference call with analysts Thursday about how important these projects were to Google. In the past, Google executives have minimized these efforts, saying they mostly focus on Google’s core business.

“As C.E.O., it’s also superimportant to keep focused on the future,” Mr. Page said. “Companies can tend to get comfortable doing what they’ve always done, with a few minor tweaks. It’s only natural to want to work on things you know. But incremental improvement is guaranteed to make you obsolete over time, especially in tech.”

Mr. Page appears to have convinced analysts and investors who had previously worried about Google’s spending on science fiction.

“It’s a loss leader,” Colin Gillis, an analyst at BGC Partners, said of the new businesses. “But I like the fact that they’re doing those things. We look at Apple and say, ‘Hey, where’s the next round of growth coming from?’ You look at Google and say, ‘Hey, these are some pretty big markets they’re chasing after.’ ”

Despite Google’s challenges with its mobile business, investors have been fleeing Apple for Google. As Google’s share price climbed 26 percent over the last year, Apple’s fell 36 percent as the company faces slowing growth and competition from Google’s Android phones.

“There’s a chance that the reference to radical change being the responsibility of a C.E.O. was an acknowledgment that perhaps Apple didn’t change enough,” Jordan Rohan, an analyst at Stifel Nicolaus, said of Mr. Page’s remarks.

Google sold its first Internet-connected glasses, Google Glass, this week to app developers, and hopes to sell them to consumers by the end of the year. And it recently announced it would sell its ultrahigh-speed Internet, Fiber, which has been available only in Kansas City, in two new cities, Austin, Tex., and Provo, Utah.

Still, Mr. Rohan added, Google’s results have more to do with things like controlling spending.

“While on some level Google is distracted by glasses and watches and tablets and a cornucopia of form factors, its core business is being run more efficiently,” he said.

Net income in the first quarter rose 16 percent to $3.35 billion, or $9.94 a share. Excluding the cost of stock options and the related tax benefits, Google’s profit was $11.58 a share, up from $10.08 a year ago. The company reported first-quarter revenue of $13.97 billion, an increase of 31 percent over the same period last year. Net revenue, which excludes payments to the company’s advertising partners, was $11.01 billion, up from $8.14 billion. Analysts had expected net revenue of $11.3 billion.

Google’s challenge is that mobile ads cost half as much as desktop ads and receive only a quarter of the clicks, according to BGC Partners. In the first quarter, the price advertisers pay Google each time someone clicks on an ad declined 4 percent from both the previous quarter and the previous year, falling for the sixth consecutive quarter.

As investors have pieced together these data points, Google’s share price had dipped 2 percent over the last week. Google has been scrambling to fix the mobile problem. Now, advertisers will buy ad campaigns on smartphones and tablets by default when they buy ads on desktop computers. The program, which is called enhanced campaigns and scheduled to be fully in effect by July, is expected to increase mobile ad prices because there will be more demand.

“They are fixing the problem, but on the backs of advertisers,” Mr. Gillis said.

Nikesh Arora, Google’s chief business officer, said in the conference call that Google was acknowledging that people were always connected to the Internet now, and wanted to see relevant ads everywhere they went.

Another challenge is Motorola Mobility, which lost $271 million in the first quarter. Google executives have said that its product pipeline is subpar. But Mr. Page said Thursday that he had just seen Motorola’s coming products and “there’s real potential to invent new and better experiences.” He hinted at the phone features Motorola was working on: longer battery life and screens that do not shatter when dropped or die when spilled upon.

Article source: http://www.nytimes.com/2013/04/19/technology/googles-earnings-beat-expections-but-revenue-does-not.html?partner=rss&emc=rss