Reporting third-quarter results after market close Thursday, Google (GOOG) topped estimates, posting net income that rose to $1.64 billion, or $5.13 a share, from $1.29 billion, or $4.06 a share in the same period last year. Net revenue for the period ended in September rose nearly one percent to $4.38 billion. Excluding items, earnings for the quarter were $5.89 a share. Consensus estimates had been calling for $5.42 a share and $4.24 billion in net revenue. The chart below shows revenue sources within Google (click to enlarge).

Impressive. Seems paid clicks grew 14 percent compared to the same period last year, and four percent compared to the prior period. Cost per click was down six percent year over year, but up five percent sequentially.

“Google had a strong quarter–we saw seven percent year-over-year revenue growth despite the tough economic conditions,” said CEO Eric Schmidt. “While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future.”

Good to hear. Google’s shares, which have already risen more than 50 percent in the past six months, are on another upward tear. They rose 1.82 percent to $539.27 on the news in after-hours trading.

Earnings call highlights via The Wall Street Journal’s Andrew LaVallee:

4:32: Call starts. The cast is the same as last quarter: Mr. Schmidt, CEO; Patrick Pichette, CFO; Jonathan Rosenberg, SVP of product management; and for the first time, Nikesh Arora, president of global sales operations and business development. But there’s a twist–they’ll be using Google’s moderator to vet questions with voters. They vote on “the most relevant questions,” which go to the Google execs, the operator says.

4:35: “While there’s obviously a lot of uncertainty about the pace of the economic recovery, we believe the worst of the recession is behind us,” Schmidt says.

He adds that Google now has the confidence to invest “heavily” in its future. “It’s all good news from our perspective, at least in looking at the quarter.”

4:37: Says “we want to really get to the perfect search engine” and that many advertisers would like to spend more with Google if the company’s product allow them to do that.

4:38: Schmidt says “we’re open for business in making strategic acquisitions, both large and small.”

4:39: It’s Pichette’s turn. “At a high level, we’re very pleased with our Q3 results,” he says. The quarter benefited from growth in AdSense for content and display initiatives.

4:41: U.S. revenue up 4% to $2.8 billion. U.K. revenue decline affected by foreign exchange as well as ongoing macroeconomic weakness, Pichette says.

4:42: Operating expenses rose from the prior quarter, mostly due to payroll, equipment and facilities-related expenses.

“We believe the worst of the recession is behind us,” he says.

4:44: Brazil was a standout in Latin America, Arora says. We’re beginning to see signs of recovery in Europe and Africa, particularly Spain. In Asia, China performed strongly as an emerging market.

4:46: Looking at the display-advertising business, those have also shown strong results, he says.

On YouTube, new advertisers and partners are helping with monetization efforts. Ninety percent of the top 50 advertisers have run YouTube campaigns with successful results–recent examples include McDonald’s and Hewlett-Packard.

4:47: YouTube has signed deals with all four major record labels and several independent labels. Earlier today, Google announced a partnership with Channel 4 in the U.K., which will bring full-length programming to the video-sharing site.

4:48: Arora adds a personal shout-out to the sales team.

4:50: Rosenberg calls the new AdWords front-end one of the company’s biggest investments of the year. Advertisers have new reports, can run more efficient campaigns and can get new features faster thanks to the platform, he says.

Dragging the company down: A 908 million euro goodwill write-off in the Nokia Siemens Networks venture it co-owns with Siemens (SI). Revenue was 9.8 billion euros, or about $14.6 billion, which was down about 20 percent compared to last year. Worse, smart-phone market share declined to 35 percent from 41 percent in the previous quarter.

Six points gone in three months? That’s a brutal loss and one that demonstrates just how much pressure the company is seeing from Apple (AAPL) and Research in Motion (RIMM), among others.

“Nokia is launching plenty of new high-end smartphone models, such as the N900 and N97 mini,” Strategy Analytics analyst Neil Mawston told Reuters. “But as yet there is no iPhone killer to drive a major revival in its smartphone volumes. Nokia is still struggling in the U.S. smartphone market, and with competition intensifying in China as well, Nokia’s battles can only get tougher in 2010.”

Still, Nokia (NOK) did have some good news to report. It expects mobile device volumes to increase in the fourth quarter of 2009 and it sees the global handset market shrinking less this year than analysts had feared–seven percent instead of 10 percent.

“It is encouraging to see some signs of recovery in our markets,” Kallasvuo said during a conference call. “But let’s be clear, uncertainty in end-consumer demand remains.”

According to the research outfit, Mac sales for July and August are up seven percent year-over-year. If this proves true, Apple (AAPL) should sell somewhere around 2.75 and 2.8 million Macs in the quarter, which would match or slightly exceed Wall Street consensus estimates. IPod sales should meet estimates as well, though NPD reports that year-over-year sales during July and August were down 16 percent.

Munster figures Apple will sell 9.5 million to 10.5 million iPods for the quarter. The Street is looking for 10 million, and with the launch of the newest nano, Apple will likely meet this goal.

“We are expecting reacceleration in the final month of the quarter given the new iPod nanos that shipped on 9/9,” Munster explained. “Also, iPod international is growing faster than domestic. In other words, we believe the actual reported numbers for iPod will be slightly better than NPD would suggest.”

“We did a long-term supply agreement with Toshiba,” Cook explained. “As a part of that, as part of the terms and conditions, we paid them $500 million as a pre-pay earlier in the quarter. You know, we view Flash as a very key component for us because as you know we use it in so much on so many of our products and also we are a reasonable percentage of the user of Flash on a worldwide basis.”

Indeed, Apple (AAPL) sells millions of NAND flash-enabled devices each year, so many that its needs often constrain supply for the entire market. In 2005, the company arranged to purchase up to 40 percent of Samsung Electronics’ holiday NAND output for use in it iPods. In July of last year Apple bought 50 million 8Gb-equivalent NAND flash chips from Samsung, forcing the company to reduce its supply to other customers.

Then, this past April, Apple ordered 100 million 8Gb–or one-gigabyte (1GB)–chips from Samsung, once again causing flash supplies to tighten. Now we have this $500 million prepayment, which, according to sources, will keep Apple in NAND for about three months.

Great news for Toshiba, which has been suffering mounting losses in the midst of tougher competition, and for the NAND market as well. As Tim Cook said yesterday, “The NAND market has now begun to stabilize and we expect it to move towards a supply/demand balance.”

Weighed down by heavy restructuring charges, Seagate reported a loss of $81 million, or 16 cents a share, compared to net income in the same quarter last year of $160 million, or 32 cents per share. Analysts surveyed by Thomson Reuters had expected, on average, a loss of 10 cents per share, excluding special items.

Ugly. And it gets worse. For the year, Seagate said it lost a horrifying $3.09 billion, or $6.32 per share.

But the situation is improving–at least, Seagate hopes so. Looking ahead, the company sees revenue of $2.4 billion to $2.6 billion in the current quarter, better than it had predicted in June. “We are…seeing signs that the storage markets are improving,” Seagate CEO Steve Luczo said in a statement. Later, during a conference later, he added, “We are approaching the September quarter cautiously.”

The device, intended as a replacement for the Centro, Palm’s last PalmOS smartphone, is expected to feature a 2.6-inch multitouch display, inline keyboard, two-megapixel camera and 4GB of internal storage, among other features. Word on the street has it priced at $99 with contract, rounding out the lower end of Palm’s new webOS lineup.

And when will it arrive at market? No one seems to know, though Tavis McCourt and Justin Patterson at Morgan Keegan & Company speculate that we’ll see it sometime this fall. “We believe initial Pixie shipments will begin in the November quarter, although timing is still uncertain (we believe the goal would likely be a holiday launch),” the analysts wrote in a research note today.

“Although Pixie is unlikely to be a ‘hero’ product with massive advertising and subsidy support, its $99 price point should drive substantial volumes and we believe distribution can be broader initially if not exclusive. In general, we have used the Centro as a benchmark for the Pixie. At a $99 retail price point, the Centro peaked out at about 1 million units shipped/quarter with distribution at all of Palm’s significant historic customers. We have the Pixie ramping quickly to these levels in calendar 2010 as distribution ramps.”

That seems a reasonable expectation, especially if the Pixie isn’t exclusive to a single carrier. And at present, it’s thought that the device will be available, at least initially, from both AT&T (T) and Sprint (S).

So, as McCourt and Patterson note, Palm (PALM) could be poised for some significant gains in market share. “We expect Pre shipments of 2.2 million in 2010 (May 2010) and Pixie shipments of 1.2 million,” the analysts write. “Based on our bottoms up estimate, we forecast Palm will ship just over 7 million smartphones in fiscal 2011, which would likely represent about 4 percent of smartphone share, but a more meaningful–10 percent share of its core N. America market.”

[Image credit: Engadget]

The company’s first-quarter profit climbed 24 percent on surging advertising sales, handily beating analysts’ estimates. And while the econalypse has troubled it a bit–the company saw a decline in active customers–Baidu is confident in its future performance. Said CEO Robin Li, “With more and more search traffic or inventory to sell and better and better monetization capability, I think this company will be able to maintain a better high growth rate for the years to come.”

A few quick highlights from the earnings statement and investor call before the official release, appended below.

• Apple sold 22.7 million iPods and 4.4 million iPhones during the quarter.
• It shipped 2.5 million Macs.
• Looking ahead to the second fiscal quarter of 2009, the company expects revenue in the range of about $7.6 billion to $8 billion.
• The release includes no mention of Jobs’s health.

During a call to discuss Apple’s latest earnings, Steve Jobs and his health were top of mind. Indeed, the first question of the call centered around this very issue:

Q: Well, since I’m going first, I guess I’ll ask how is Steve and hope he’s doing well. And I just wanted to know how, if you’ll run the company differently with Tim or the same and if need be, if Tim — do you feel like you would be the likely candidate if the worst case scenario were to happen if Steve was unable to return.”

Apple COO Tim Cook: There is an extraordinary depth and breadth in Apple’s executive team. And it leads over 35,000 wicked smart people. We believe we’re on the face of earth to make great products, and that’s not changing. We believe in simple not complex. We believe in deep collaboration. We have the self-honesty to admit when we’re wrong. These values are so embedded in the company that we will do extremely well regardless of who has the CEO Job. I strongly believe that Apple is doing the best work in its history.

Also the focus of some discussion the possibility of an Apple netbook. Is Apple considering entering the sub-$500 netbook market? Cook says not right now. “We’re watching that space, but from our point of view, the products are based on hardware that’s not very powerful, software that’s not that good and cramped displays. We don’t think that people are going to be pleased with that. It’s a category we watch and we have some ideas for it, but we think the products there right now are inferior.”

Here’s the official release:

Apple Reports First Quarter Results
Best Quarterly Revenue and Earnings in Apple History
iPod Sales Set New Record

“Even in these economically challenging times, we are incredibly pleased to report our best quarterly revenue and earnings in Apple history—surpassing $10 billion in quarterly revenue for the first time ever,” said Steve Jobs, Apple’s CEO.

A disheartening prediction. And to make matters worse, Bailey speculates that Apple (AAPL) won’t unveil any new product categories at MacWorld come January, and because of that won’t see the sort of near-term pop it typically experiences after the introduction of a compelling new product. Said Bailey, “[The] nearer-term outlook is less positive, as it now looks unlikely that Apple will launch a new product category at MacWorld in early January, taking away a potential catalyst for the shares and causing Apple to try to generate demand in a tough environment without the benefit of a new offering in the first part of 2009.”

Apple shares closed at $94.75, down 3.58 percent for the day on the news.

If he’s right, Apple (AAPL) would seem on track to hit its goal of 10 million iPhones sold in calendar 2008. And with some analysts predicting that Apple will sell 10 million Macs this year, 2008 may well prove a landmark year for the company.

Best of all, Intel predicted more strong sales in the months to come. “As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe,” Intel CEO Paul Otellini said in a statement. Comments like that, coupled with Intel’s strong Q2 earnings, should go a long way toward reassuring investors that the technology sector isn’t succumbing to the economic downturn. At least until AMD reports second quarter results on Thursday. Analysts expect AMD (AMD) to post a loss of 52 cents per share.

And that’s not all. In notebooks, Apple’s sales are growing at twice the market’s current rate.

Oh, and in personal computers retailing over $1,000, Apple’s machines comprised two-thirds of all that were sold during the first quarter.

Granted, the Cupertino, Calif., company only sells one Mac priced below $1,000 (the Mac Mini) and its rivals’ offerings typically price out in the $599-to-$799 range. Still, that two-thirds metric is impressive nonetheless.

Certainly, it seems Apple has tapped deeply into an affluent and expanding fan-base that’s willing to pay a premium for its iProducts. Said Stephen Baker, NPD’s vice president of industry analysis: “People see a value proposition in an offering that gives them a great experience. What Apple drives home [is this]: This is a product that we own from factory to finger. We exert some control so that you get the best experience. When you get in the store, we get you what you want.”

Was he inebriated? Do you even know anyone who owns a Zune?”

–-Apple CEO Steve Jobs on Microsoft’s claim that the Zune is now a worthy alternative to the iPod.

Despite its feature differentiations and, er, “distinctive” color palette, Microsoft’s (MSFT) Zune has yet to prove itself the iPod killer it was once touted as. Since its launch in November of 2006, the Zune has sold 2 million units. In comparison, Apple (AAPL) in its last quarter sold 10.6 million iPods–quintuple Microsoft’s cumulative sales to date. Zune’s market share in this space during the first quarter: 4%. Apple’s share: 71%.

Clearly, the only thing being killed by Microsoft’s iPod killer are Microsoft’s chances for unseating Apple in a market that would seem–according to relatively flat year-over-year iPod sales–to have peaked without it.

Great news for Vonage (VG), which has been tormented by a barrage of costly legal battles and set upon by new and powerful rivals. The company’s net loss shrank to $8.96 million, or 6 cents a share, from a loss of $72.3 million, or 47 cents, in the year-earlier quarter.

Sadly for Vonage, the company’s Q1 loss isn’t the only thing that shrank. Subscriber growth did as well. The company signed up just 30,000 new subscribers in the quarter, a big decline from a year earlier when it added nearly 166,000 subscribers. Worse, turnover rate increased to 3.3% from 3% in the fourth quarter.

Still, Vonage is a bit healthier than it’s been for some time now. So while it may not exactly be on the road to recovery, it’s at least crawling in its general direction. To that end, the company’s inked a deal to resell Covad’s DSL service under the Vonage Broadband name. An interesting idea, in that it will allow Vonage to bundle a broadband offering with its Internet telephony services like most other phone and cable companies on the planet. But DSL? Really? At a time when Verizon (VZ) is expanding its FiOS fiber-optic service and Comcast (CMCSA) is boosting the speed of its high-tier cable broadband?