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Associated Press

MOUNTAIN VIEW, Calif. — Coming off a stellar first quarter, Google Inc. seems to have regained the momentum that it lost shortly after the U.S. recession started in December 2007.


But it looks like it’s going to take a lot longer for the Internet search leader’s stock price to rebound to its pre-recession levels.

The shares fell nearly 5 percent late Thursday after the company released first-quarter results that exceeded analyst expectations.

Earnings rose 37 percent and revenue surged 23 percent. The latter figure represented Google’s highest growth rate since the summer of 2008.

Google rattled investors, though, by adding nearly 800 workers in the quarter, the most in two years, and vowing to spend heavily to hire even more employees, snap up smaller companies and develop more products beyond the Internet search advertising market that generates most of the company’s profits.

The loosening pursestrings could crimp earnings growth. The increased spending also raised worries that Google might be abandoning some of the financial discipline that it exerted in late 2008 and last year as the recession deepened.

Patrick Pichette, Google’s chief financial officer and the driving force behind the cost cutting, said the company remains "generous but frugal." He scoffed at the notion that Google would become a spendthrift now that it’s thriving again.

"Hiring more people does not mean we are wasteful," he said in a Thursday interview. "It just means we have a great agenda."

Another possible concern: The average price paid for Google ads in the first quarter was 4 percent lower than the fourth quarter, traditionally a period of heavy demand because of the holiday shopping season. The average price was 7 percent higher than a year ago.

The sequential slowdown fed the theory that Google may be facing more pricing pressure as both Microsoft Corp.’s Bing search engine and Facebook’s popular online hangout attract more advertisers.

Google shares shed $29.10 in Thursday’s extended trading after closing at $595.30, up 1.1 percent in the regular session. That fall leaves Google shares down by about 9 percent so far this year and well below their record high of $747.24 in November 2007, reached a month before the U.S. economy began its worst recession in more than 70 years.

Now, it looks like the online advertising and technology sectors are bouncing back much faster than most of the economy.

"The digital economy is running flat out with so much innovation," Pichette said. "(It’s) going gangbusters."

Pichette, who joined Google in 2008, steered the conference call, filling Google CEO Eric Schmidt’s usual role. It marked the first time that Schmidt hasn’t been on Google’s earnings conference call since the company went public in August 2004.

The decision to have Schmidt sit out the call was disclosed to The Associated Press several weeks ago. Pichette advised analysts not to read anything into the switch, which he said was aimed at focusing the discussion on Google’s finances.

The company earned nearly $2 billion, or $6.06 per share in the first quarter, up from $1.42 billion, or $4.49 per share.

Revenue climbed 23 percent to $6.78 billion. That marked Google’s greatest revenue growth since the third quarter of 2008.

If not for expenses covering employee stock compensation, Google said it would have earned $6.76 per share. That figure exceeded the average estimate of $6.60 per share among analysts surveyed by Thomson Reuters.

After subtracting commissions paid to advertising partners, Google’s revenue stood at $5.06 billion. That was about $90 million above analyst estimates.

The most noticeable change in Google’s spending patterns cropped up in the company’s payroll. After the first-quarter hiring, Google employed 20,621 people – the most in its 11 1/2-year history. Management had trimmed nearly 400 jobs from the payroll last year to boost its profit as revenue growth slowed.