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Google shares sink after Q4 earnings miss Wall Street expectations

Shares of Google fell more than 9 percent in after-hours trading after the company missed both Wall Street's revenue and earnings expectations when it reported its fourth quarter 2011 results on Thursday.

The Mountain View, Calif., company reported 25 percent growth year over year with revenues of $10.58 billion for the December quarter. Operating income for the period was $3.51 billion, up from $2.98 billion in the year-ago quarter.

Though Google's quarterly performance still represented a sequential increase, but investors voiced concerns that its growth had decelerated from previous quarters. The company's net revenue of $8.13 billion missed consensus estimates of $8.4 billion, as tracked by Thomson Reuters.

Google stock was up $6.66, or 1.05 percent, at the close of the market on Thursday, but its disappointing quarterly results prompted a sell-off that caused shares to drop $57.67 to $581.90.

As is to be expected, Google's top brass remained upbeat about the results. CEO Larry Page said he was "super excited" about the growth of Android, Gmail and Google+, adding that its new social networking service now has 90 million users globally.

"I'm very excited about what we can do in 2012—there are tremendous opportunities to help users grow our business," Page said.

But, analysts were quick to pick up on 8 percent decline in the average cost-per-click, its first year-on-year drop in two years, for the search giant. They hounded Page with half a dozen questions about the issue during the Q&A portion of the earnings conference call, prompting the CEO to ask that the next question not be about CPCs, Reuters reported.

"The major question is: Is this a one-time thing or is this something that is going to continue because the nature of the business has changed," Colins Stewart analyst Mayuresh Masurekar said.

Company executives attributed the decline to currency exchange fluctuations and advertising format changes. But analysts feared that mobile advertising may have caused the drop in cost-per-click rates.

"This was the first time we've seen a decline in CPC rates since 2009," Needham & Co analyst Kerry Rice told the publication. "It's been a long time and the one thing that's really changed about this is mobile."

The report also noted that investors remain uneasy about Google's planned acquisition of Motorola Mobility. They are reportedly concerned that entering the low-margin hardware business could affect Google's bottom line and scare off Android vendors.

Google's results appeared even worse considering that fellow technology giants Microsoft, Intel and IBM all reported solid earnings on Thursday. Though Microsoft did note a 6 percent decline in its Windows business, it made up for it with its gaming, Office and server divisions. Intel managed to beat expectations, which had been scaled back because of a weakened PC market.

For its part, Apple is expected to report stellar earnings for the December quarter next Tuesday. Record iPhone and iPad sales are likely to drive a blowout quarter for the company.