Summary:

Google (NSDQ: GOOG) CEO Eric Schmidt described the search giant’s Q4 as strong, claiming that although the goal of cost-containment eluded i…

Google (NSDQ: GOOG) CEO Eric Schmidt described the search giant’s Q4 as strong, claiming that although the goal of cost-containment eluded it in the past, they’ve “finally got it down.” In some ways Q4 was easy — there were holidays — but now, with the worsening economy, this is uncharted territory. He continued to express optimism that Google would benefit from the trends in search and online media in general. The problems of this past quarter stemmed mostly from $1.09 billion in writedowns tied to AOL (NYSE: TWX) and Clearwire (NSDQ: CLWR).

I exchanged e-mails with Needham & Co. analyst Mark May during the call. As for Schmidt’s trumpeting Google’s 18 percent paid click growth, May told me he found the results “encouraging from a consumer-demand and ad-coverage perspective.” But the 2 percent decline in average revenue per-paid-click is disappointing from an advertiser demand perspective, he added. In the end, Schmidt’s lines from the call — “last quarter was the easy part,” “we don’t know how long this will last,” “we’re prepared to cut more costs” — suggest that Google should come close to expectations for earnings this year. More from the call after the jump.

Release | Transcript (via Seeking Alpha)

Exchange program: About 85 percent of Google’s employees have company stock that is under water, so the company is going to offer people to do a voluntary stock exchange. The stock covered by the program represents 3 percent of Google’s total outstanding shares.

Surveying the field: Schmidt offered a rundown of why Google will remain healthy despite the poor economic climate. We’re producing ads that have greater relevancy and that will translate into more revenue. DoubleClick integration is almost complete and we’re trying to bring search’s benefits to display. We have 800 free apps on the G1 Android phone.

What layoffs?: CFO Patrick Pichette avoided mentioning the contractors who were laid off during Q4, saying, “We’re still hiring. We had a net gain of 100 employees in the quarter.”

Video progress?: Schmidt says Google and YouTube are still trying to find ways of driving video. Jonathan Rosenberg, SVP, product management, added: We’ve done multiple ad experiments and it’s hard to match the content with the right format. We have to find a standardized format. We have extended Google TV Ads with a number of media companies, such as NBC and Bloomberg, so we’re making progress.

Capital expenditures: Capital expenditures were $368 million, down significantly from previous quarters, one analyst noted during the Q&A. Pichette said that the company was pleased by the cap ex performance and insisted that the company is continuing to invest in its infrastructure. On cost structure, the CFO said the real issue is “we have a labor intensive business; we take care of our employees.”

Display: The last question was about display. Omid Kordestani, SVP, global sales and operations, said the company is starting to see more inventory, which is a sign of success of the still incomplete DoubleClick integration and other offerings. “We believe this is still a great market for us and we’re starting to get more traction.”

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