The pottymouthed Bartz held it together for her first conference call with Wall Street analysts. Almost. Right at the end of yesterday's earnings call, she got asked some tiresome question about Yahoo's latest layoffs. You can hear the frustration and annoyance in her voice. "We had a lot of people telling engineers what to do but nobody fucking doing anything. [pause] Excuse me. I knew that would slip out one of these times."

What makes the slipup extra hilarious: We hear Yahoo's beleaguered public-relations staff had promised reporters that Bartz would hold it in for the call.

To no one's shock, Yahoo's ad-dependent business struggled amidst the worst advertising market in recent history. The company is laying off another 700 employees — though, thanks to Yahoo's lousy cost controls and poor planning, they'll probably hire that many people in a couple of months. We wonder how long it will take Bartz to figure out that Yahoo's business is thoroughly broken, and not in a way that can be fixed with a few well-chosen curse words.

Kordestani was Google's first moneyman, the company's so-called "business founder." He is taking the role of an advisor to Google founders Larry Page and Sergey Brin. This semi-retirement is understandable; even after an expensive divorce and the decline in Google shares, he is still worth $1.4 billion, the result of his well-timed jump to Google when it was a fledgling startup.

Like any good salesman, Kordestani has a talent for following the money. Is it that same sense of timing that is leading him to leave now, while Google could still report one decent quarter of earnings?

Here's how the release puts it:

Recent Developments – After ten years of building and managing our global sales and partnership operations, Omid Kordestani has decided to hand over the reins to Nikesh Arora, currently President of International Operations, and take on a new role as Senior Advisor, Office of the CEO and Founders. Continued growth is essential to our future success and no one is better placed to advise on new revenue opportunities than Omid, the business founder of Google. In his new role as President, Global Sales Operations and Business Development, Nikesh Arora will have responsibility for all Google's revenue and customer operations, as well as marketing and partnerships. He has a proven track record at Google, having spent the last four and a half years building our European operations into a substantial business.

(Photo by John D. McHugh/AFP/Getty Images)

1) Intel is not the bellwether that it once was. Personal computers and servers, the primary destination for Intel's processors, are not nearly as large a percentage of tech spending as they were back in 2001.

2) Layoffs in the economy have already begun. Fewer employees, fewer PCs needed.

3) Large companies are accelerating virtualization projects. Virtualization is a fancy word for running more applications on fewer servers. It is greener (less power), simpler (fewer servers to break), and cheaper. Good for companies looking to lower capital expenditure and operating expenses in a recession, but bad for Intel.

What's odd is that Time Warner CEO Jeff Bewkes isn't getting more criticism for AOL's numbers. As the head of HBO, he was one of a handful of Time Warner executives who loudly opposed the AOL deal. But enacting Time Warner's revenge on AOL by driving the business into the ground seems a strange way of making things right with shareholders.

Bewkes's hand-picked boss for AOL, former NBC executive Randy Falco, has been a complete disaster — a short-timer waiting for the company to be sold. Bewkes and Yahoo's Jerry Yang have been holding desultory talks on selling AOL to Yahoo. But Bewkes's negotiating position is considerably weakened by these results. Why didn't he sell sooner — and when will he pay the price for mismanaging AOL?

Remember the original Walkman? The first Vaio? These days, Sony products don't threaten Steve Jobs. They irritate him. Even Sony knows their stuff's not cool. Look at the photos on their home page: James Bond. Pink. "Try to solve the mystery of the Passengers ... Save the world from bad music." No product shots except a thumbnail-size Playstation HD shoved in the lower right corner. I'm sure the focus group loved it. But to a gearhead like me it screams, "I'm Sony. Please kill me."

Note 10 — Subsequent Event
In October 2008, a third party announced the acquisition of a company in which we held an equity-method investment. Subject to the closing of the acquisition, which is expected to occur in Q4 2008, we will receive approximately $150 million in cash for our equity ownership.

• Jealousy. Amazon.com CEO Jeff Bezos wished his company, not eBay, had bought Bill Me Later, and didn't want to give his rival credit.
• Remorse. Did Amazon.com actually profit from its Bill Me Later investment? We may learn more next quarter, but note that Amazon only disclosed how much cash it received, not how much money it made.
• Shame. Bill Me Later charges a 19.99 percent interest rate, which is higher than many credit cards. Sure, that's lucrative — but does Amazon want to be associated with a website personal-finance experts say you shouldn't touch "with a 10-foot gift-wrapped pole"?

MOUNTAIN VIEW, Calif. – October 16, 2008 - Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter ended September 30, 2008.

“We had a good third quarter with strong traffic and revenue growth across all of our major geographies thanks to the underlying strength of our core search and ads business.  The measurability and ROI of search-based advertising remain key assets for Google,” said Eric Schmidt, CEO of Google.  “While we are realistic about the poor state of the global economy, we will continue to manage Google for the long term, driving improvements to search and ads, while also investing in future growth areas such as enterprise, mobile, and display.”

Q3 Financial Summary

Google reported revenues of $5.54 billion for the quarter ended September 30, 2008, an increase of 31% compared to the third quarter of 2007 and an increase of 3% compared to the second quarter of 2008. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC).  In the third quarter of 2008, TAC totaled $1.50 billion, or 28% of advertising revenues.

Google reports operating income, net income, and earnings per share (EPS) on a GAAP and non-GAAP basis.  The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.

?       GAAP operating income for the third quarter of 2008 was $1.74 billion, or 31% of revenues.  This compares to GAAP operating income of $1.58 billion, or 29% of revenues, in the second quarter of 2008. Non-GAAP operating income in the third quarter of 2008 was $2.02 billion, or 37% of revenues. This compares to non-GAAP operating income of $1.85 billion, or 34% of revenues, in the second quarter of 2008.

?       GAAP net income for the third quarter of 2008 was $1.35 billion as compared to $1.25 billion in the second quarter of 2008.  Non-GAAP net income in the third quarter of 2008 was $1.56 billion, compared to $1.47 billion in the second quarter of 2008.

?       GAAP EPS for the third quarter of 2008 was $4.24 on 318 million diluted shares outstanding, compared to $3.92 for the second quarter of 2008 on 318 million diluted shares outstanding.  Non-GAAP EPS in the third quarter of 2008 was $4.92, compared to $4.63 in the second quarter of 2008.

?       Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP EPS are computed net of stock-based compensation (SBC).  In the third quarter of 2008, the charge related to SBC was $280 million as compared to $273 million in the second quarter of 2008.  Tax benefits related to SBC have also been excluded from non- GAAP net income and non-GAAP EPS.  The tax benefit related to SBC was $63 million in the third quarter of 2008 and $48 million in the second quarter of 2008.  Reconciliations of non-GAAP measures to GAAP operating income, operating margin, net income, and EPS are included at the end of this release.

Q3 Financial Highlights

Revenues – Google reported revenues of $5.54 billion for the quarter ended September 30, 2008, representing a 31% increase over third quarter 2007 revenues of $4.23 billion and a 3% increase over second quarter 2008 revenues of $5.37 billion.  Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues - Google-owned sites generated revenues of $3.67 billion, or 67% of total revenues, in the third quarter of 2008.  This represents a 34% increase over third quarter 2007 revenues of $2.73 billion and a 4% increase over second quarter 2008 revenues of $3.53 billion.

Google Network Revenues - Google’s partner sites generated revenues, through AdSense programs, of $1.68 billion, or 30% of total revenues, in the third quarter of 2008.  This represents a 15% increase over network revenues of $1.45 billion generated in the third quarter of 2007 and a 1% increase over second quarter 2008 revenues of $1.66 billion.

International Revenues - Revenues from outside of the United States totaled $2.85 billion, representing 51% of total revenues in the third quarter of 2008, compared to 48% in the third quarter of 2007 and 52% in the second quarter of 2008.  Had foreign exchange rates remained constant from the second quarter of 2008 through the third quarter of 2008, our revenues in the third quarter of 2008 would have been $59 million higher.  Had foreign exchange rates remained constant from the third quarter of 2007 through the third quarter of 2008, our revenues in the third quarter of 2008 would have been $168 million lower.

In the third quarter, we recognized a benefit of $34 million to revenue through our foreign exchange risk management program.

Revenues from the United Kingdom totaled $776 million, representing 14% of revenue in the third quarter of 2008, compared to 16% in the third quarter of 2007 and 14% in the second quarter of 2008.

Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 18% over the third quarter of 2007 and increased approximately 4% over the second quarter of 2008.

TAC - Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, increased to $1.50 billion in the third quarter of 2008.  This compares to TAC of $1.47 billion in the second quarter of 2008.  TAC as a percentage of advertising revenues was 28% in the third quarter, compared to 28% in the second quarter of 2008.

The majority of TAC expense is related to amounts ultimately paid to our AdSense partners, which totaled $1.33 billion in the third quarter of 2008.  TAC is also related to amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $167 million in the third quarter of 2008.

Other Cost of Revenues - Other cost of revenues, which is comprised primarily of data center operational expenses, amortization of intangible assets, content acquisition costs as well as credit card processing charges, increased to $678 million, or 12% of revenues, in the third quarter of 2008, compared to $674 million, or 13% of revenues, in the second quarter of 2008.

Operating Expenses - Operating expenses, other than cost of revenues, were $1.63 billion in the third quarter of 2008, or 29% of revenues, compared to $1.64 billion in the second quarter of 2008, or 31% of revenues.  The operating expenses in the third quarter of 2008 included $859 million in payroll-related and facilities expenses, compared to $810 million in the second quarter of 2008.

Stock-Based Compensation (SBC) – In the third quarter of 2008, the total charge related to SBC was $280 million as compared to $273 million in the second quarter of 2008.

We currently estimate stock-based compensation charges for grants to employees prior to October 1, 2008 to be approximately $1.1 billion for 2008.  This does not include expenses to be recognized related to employee stock awards that are granted after October 1, 2008 or non- employee stock awards that have been or may be granted.

Operating Income - GAAP operating income in the third quarter of 2008 was $1.74 billion, or 31% of revenues.  This compares to GAAP operating income of $1.58 billion, or 29% of revenues, in the second quarter of 2008.  Non-GAAP operating income in the third quarter of 2008 was $2.02 billion, or 37% of revenues.  This compares to non-GAAP operating income of $1.85 billion, or 34% of revenues, in the second quarter of 2008.

Interest Income and Other, Net – Interest income and other was $21 million in the third quarter of 2008, compared with $58 million in the second quarter of 2008.  The decrease was primarily related to an increase in expenses substantially due to more activity under our foreign exchange risk management program. The cost of the options used to manage our foreign exchange risk is amortized on a mark-to-market basis.  As a result, the amount of amortization expense we recognize in any particular quarter is impacted by how much the option moves into or out of the money, as well as the underlying currency's volatility.

Net Income – GAAP net income for the third quarter of 2008 was $1.35 billion as compared to $1.25 billion in the second quarter of 2008. Non-GAAP net income was $1.56 billion in the third quarter of 2008, compared to $1.47 billion in the second quarter of 2008.  GAAP EPS for the third quarter of 2008 was $4.24 on 318 million diluted shares outstanding, compared to $3.92 for the second quarter of 2008, on 318 million diluted shares outstanding.  Non-GAAP EPS for the third quarter of 2008 was $4.92, compared to $4.63 in the second quarter of 2008.

Income Taxes – Our effective tax rate was 24% for the third quarter of 2008.

Cash Flow and Capital Expenditures – Net cash provided by operating activities for the third quarter of 2008 totaled $2.18 billion as compared to $1.77 billion for the second quarter of 2008.  In the third quarter of 2008, capital expenditures were $452 million, the majority of which was related to IT infrastructure investments, including data centers, servers, and networking equipment.  Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures.  In the third quarter of 2008, free cash flow was $1.73 billion.

We expect to continue to make significant capital expenditures.

A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

Cash – As of September 30, 2008, cash, cash equivalents, and marketable securities were $14.4 billion.

On a worldwide basis, Google employed 20,123 full-time employees as of September 30, 2008, up from 19,604 full-time employees as of June 30, 2008.