Google down in Q4, down on AOL, too

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Google on Thursday posted its first declining quarter as a public company then delivered a blow to Time Warner by writing down the value of AOL, in which Google owns a 5% stake.

Google invested $1 billion in Time Warner's AOL asset in 2005 but said Thursday that it has written that down by $726 million, suggesting the value of AOL has fallen from $20 billion in 2005 to about $5.5 billion.

While Google reported fourth-quarter earnings that fell 68% to $382 million, investors cheered the results by bidding the stock as much as 2% higher in after-hours trading. The stock was up 1% during the regular session to $306.50.

Revenue rose 18% to $5.7 billion, half of which came from outside the U.S., up from 48% a year ago.

While it's "absolutely true" that advertising is still moving to the Internet, CEO Eric Schmidt said, the worldwide economy has taken a toll on Google's business.

"We're certainly prepared to get through this — no problem," Schmidt said during a conference call.

Google execs also boasted that they are working on ways for the company's search technology to recognize the meaning of phrases as opposed to words, and they said new video ad formats have gained "some traction."

Google shares have fallen about 50% in eight months. (partialdiff)
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