Google (NASDAQ: GOOG) released their 1st quarter earnings report yesterday and the results were a mixed bag. You can get a feeling for the market's and media's reactions by reading the headlines: Some focus on the continuing net income growth while some are focused on the slowing revenues.             

First, for those of you who haven't seen them yet, a quick review of Google's 1st quarter numbers. Revenues of $5.51 billion were 6% higher than the same quarter in 2008 but down 3% from the 4th quarter of 2008. Net income (excluding special items) was $5.16 per share, beating Wall Street estimates by 23¢ a share and 32¢ or 6.6% higher than the 1st quarter of 2008. Google had an operating margin of 39% in the 1st quarter compared to 35% a year earlier.

Google management was able to keep the net profit growing in the 1st quarter by cutting expenses so more of the revenues fell to the bottom line. The first quarter of 2009 was a time of some of the greatest negative news and emotion about the economic situation that I have seen in my lifetime. I think the financial results for the quarter point out how well Google management manages their business. Company management does not give any forecasts on revenues or earnings, so it is up to analysts to try to figure out where the company's results will come in. It appears that Google has the strong foundation to continue to exceed expectations.

I had not visited Google's investor page before and I found it to be like most things Google does, easy to navigate with lots of good information. I discovered some interesting facts on the slide show that accompanied the earnings release:

Free cash flow for the first quarter was $1.987 billion compared to $938 million a year earlier. That kind of money gives a company a lot of flexibility to grow their business and wreak havoc on competitors.

International revenues are now 52% of sales compared to 42% three years ago. The global footprint of Google is astounding and bodes well for future growth.

Looking forward, the 2nd and 3rd quarters are historically a little soft for Google. It will be interesting to see if they can manage expenses to continue to surprise the market with sustained income growth. Longer term I expect Google to continue to siphon off ad dollars from the traditional advertising on television and newspapers. The recent announcement of the availability of full length TV shows and movies on You Tube will only accelerate the trend. Even in a world of shrinkage in total advertising dollars I think Google can continue to grow their revenues.

I put Google is the small group of companies that have the ability to continue their growth in the face of slowing economies and when their competitors have falling revenues and profits. Other companies I put in this class are Walmart, IBM, Mcdonald's, Coke and Apple. These are companies that find a way to thrive in any economic environment.