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Google capital spending spike will slow 2006 growth

Posted by iNext - 2006-03-19

US Internet search giant Google said it expects to spend "significantly" more this year to continue to innovate and resist competition from the likes of Microsoft and Yahoo.

Revenue growth will continue to decline amid increasing competition, and the larger revenue base will also mean a slower rate of growth, Google said in its annual form filed late Thursday with the Securities and Exchange Commission.

"Our investments in property and equipment, including information technology infrastructure and land and buildings, will likely be significantly greater in 2006 compared to 2005," the Mountain View, California company said.

Google's capital expenditures grew to 838.2 million dollars in 2005 from 319 million in 2004.

"We expect that our revenue growth rate will decline over time and anticipate that there will be downward pressure on our operating margin" due to increasing competition and increased expenditures, the world's most popular search engine company said.

"If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, and our revenues and operating results could suffer," it said.

The company, whose 2005 sales were 99 percent-based on advertising revenue, is also vulnerable to competition from the traditional media such as television and the press.

Google said it expected to complete in the 2006 second quarter its one billion dollar acquisition of a five-percent stake in America Online, the Internet arm of media-entertainment giant Time Warner.

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