Google Analyst Meeting Analysis

MARIA BARTIROMO, CNBC ANCHOR: A widely watched analyst meeting underway right now in Mountain View, California where Google management meeting with analysts and so far, CEO Eric Schmidt told a crowded room the company`s goal is to become a $100 billion company. He also said it plans to put

systems in place to help reach that scale during 2006. You`re looking now at the webcast of the meeting. Schmidt also underscored the company is focused on long-term growth and has no plans to alter its policy of refusing to set short-term financial targets. Remember, just two days ago, the company`s chief financial officer, George Reyes, shocked the market with talks about slowing growth, sending the share price down as much as 15 percent in the intraday. It ended down 7 percent that day. Of course, today, he changed his tune, saying the future looks bright.

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MARTIN REYES, CHIEF FINANCIAL OFFICER, GOOGLE: We believe we have a very deep pipeline of new products and monetization opportunities. And we have an extraordinary track record of producing growth. We`re also making very disciplined investments for our long-term health.

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BARTIROMO: Take a look at stock today, up $13 a share. That is about 3 2/3 percent higher, now at 377.97. Martin Pyykkonen, internet software analyst at Hoefer & Arnett is at the meeting. He joins us now live in Mountain View.

Martin, thanks for stepping out of that meeting for a few minutes to join us. We appreciate it.

MARTIN PYYKKONENE, INTERNET SOFTWARE ANALYST, HOEFER & ARNETT: Thanks, good to be here.

BARTIROMO: Tell me the most important thing or the biggest surprise that you heard so far being at the meeting.

PYYKKONENE: I don`t know if I`d call it surprise, I think the two takeaways, so far, and we`re only about midway through the presentation -- and George, the CFO, who you mentioned hasn`t presented formally yet -- but I think the two things are that the company still believes they have a lot of head room on pricing. You know you saw advertising rates go up pretty substantially over the last 12 months. That was one of my key questions going in. And although they don`t provide flood or quantitative metrics to that, they believe there`s a lot of head room there. So that`s good news for them.

The second thing is they`re really moving upstream very quickly and aggressively to larger advertisers. This company was built over the last year on roughly the middle size of the advertiser market. Now, they`re going after a market that frankly, Yahoo! has been ahead of them in the last two or three years, but Google is investing and meeting the fortune 1,000, Fortune 500, both U.S. and comparable numbers over in the international markets.

BARTIROMO: So that comment on pricing that you mentioned, that obviously is good news. That`s going to help margins. How important would it be for Google, and I guess it applies to the industry, right, if we were to see a substantial pickup in prices? And what kind of a pickup would you expect?

PYYKKONEN: Well, last year, or over the last 12 months, by my estimate, and again, this is not something that the company provides, I think that 25 percent or so of Google`s top line revenue growth was driven by this average increase in prices; the other being volume of ads and paid search clicks. So what they`re implying, although, again, they`re not giving an exact number or guidance, is something of that kind of magnitude, certainly a doubling digit percentage. Basically, what they`re saying is that advertisers are finding the search advertising market very effective. They can target customers. They get good quality traffic. They can birth that to a sale often enough that they`re willing to pay higher prices. So far so good as we look through 2006 on that front.

BARTIROMO: Martin, of course, the big talk earlier in the week was this comment from the CFO, George Reyes, about advertising having to slow down at some point. Did management say anything to reverse those comments or back away from those comments in your view?

PYYKKONEN: I wouldn`t say reverse but they provide a lot of detail in terms of all of the large opportunities that they`re going after to monetize, which will be primarily through advertising. You know one of the kinds of quotable quotes that they talk about a lot is solving big problems in the world and finding different ways to monetize that advertising. So I think you know, at least, indirectly, they`ve reversed those comments so far. Again, George hasn`t talked. And he`s talking formally in terms of his presentation right about at the time the market closes today.

BARTIROMO: All right.

PYYKKONEN: So we`ll see if there`s any new information then.

BARTIROMO: Yes. And of course, we`ll have that latest information on the next hour of the CLOSING BELL.

Martin, one last question before we let go back to that meeting, the stock right now is up about $14, up 4 percent higher. Is it warranted to see this stock rally right here from what you`ve heard so far?

PYYKKONEN: I think it`s warranted to rally considering it`s been, you know, beaten down and the sentiment has been pretty negative. Again, I think the strategic comments that they`re making are somewhat reassuring to people. And you know I`ve been saying at this level, there`s some pretty good value on the stock even though it may take a while to get to the lofty price targets that are out there.

BARTIROMO: All right, we`ll leave it there. Martin, nice to have you with us as always; thank you.

PYYKKONEN: OK, thanks.

BARTIROMO: Martin Pyykkonen -- and again, we will be covering the analyst meeting and bring you the latest as we get that information.

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