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Exxon Mobil Corp. smashed its own record for quarterly profits today, ringing up $14.8 billion in net income in the third quarter powered by soaring summertime crude oil prices.

BP registered a monumental 148 per cent rise in quarterly profits yesterday that was only partly thanks to the recent high oil price.

As economies around the world shudder at the prospect of approaching recession, the oil giant said that pre-tax profits of $11.5bn (£7.4bn), up from $6.3bn, from the company's upstream operations, and growth of 70 per cent to $.13bn in its downstream activities, contributed to replacement cost profit of $10bn for the group as a whole. Operating cash flow in the third quarter also stood at its highest-ever value, up by 133 per cent to $14.9bn. BP will pay a dividend in December of 14 cents per share, up 30 per cent in dollar terms and 60 per cent in sterling.

Despite the disruption caused by hurricanes and interruptions to output from its Caspian fields, oil and gas production was up by around 5 per cent to just under 4 million barrels of oil equivalent, helped by particularly good performance at the Thunder Horse platform in the Gulf of Mexico.

Tony Hayward, BP's chief executive, was keen to stress the stellar performance is not only because of the ballooning oil price, which hit an unprecedented $147 per barrel in July before plummeting to below $65 this week.

"Although it has since fallen away sharply, the high price of the third quarter obviously helped our absolute result," Mr Hayward said. "But this should not obscure operational improvements in refining and rigorous cost control across the company that kept our cash costs essentially flat compared with last year, despite immense inflationary pressures in the sector."

Despite the expectation of a tough fourth quarter across the industry as oil prices continue to fall and recessionary pressures hamper demand, Mr Hayward remains bullish—even acquisitive—in the face of economic volatility. "We think the current turmoil may create opportunities for us and we will look at those very closely," he said. "Our balance sheet is strong and we have committed less of our portfolio to high-cost options like tar sands and gas conversion than peers."

But the squeeze is already being felt, and BP acknowledged that end user demand for oil products in the US and Europe is weak, with year-on-year demand down 5 per cent, not helped by a sharp cut in American driving habits.

BP's strong performance is acknowledged in the City, and the company's shares closed up 23.5p at 461.5p yesterday. "This is the third quarter in a row that BP has done better than expected, which tends to bear out the view that the Forward Agenda is being delivered," Colin Smith, an analyst at Dresdner Kleinwort, said.

"We would have expected that there would be a decline in comparison with the first or second quarters, partly because of the dropping oil price but also because the third quarter is seasonally weak. But sequentially the numbers are up, not just year on year, so there is pretty clear evidence that it is more than just the oil price."

But with oil down by more than half since the summer, the prognosis for the next three months is weaker. "There is no question that earnings will be down in the fourth quarter because of decline from the exceptional, unsustainably high oil price, but BP is outperforming its market, so we would expect it to suffer less than most," Mr Smith said.

Meanwhile, Paul Skinner, chairman of Rio Tinto, is being tipped to take over the chairmanship of BP when Peter Sutherland steps down in spring.

Oil price falls: Opec warns it may reduce supply for a third time

The oil price ticked up yesterday after oil-producing countries' cartel Opec warned it may cut supply even further to put a floor under the spiralling market. Abdullah el-Badri, Opec's secretary general, told reporters at a London conference yesterday that the continually-falling price may force another emergency summit before the next official meeting scheduled for 17 December in Algeria.

"We will have to wait and see how the market will react, but if this continues then we will have another cut," Mr Badri said. "If he situation deteriorated where we had to have another meeting before Algeria we will do that."

Oil has slumped by more than half since its $147 per barrel high in July. Production cuts from Opec in September and at the end of last week, have done nothing to stop the decline, and Monday saw yet another round of steep drops. The news that Opec might act again had an immediate impact, pushing New York crude for December delivery up nearly $2 to $65 and Brent North Sea for December up over $1 to $62.70 in afternoon trading.

Qwest 3Q profit down; will cut 1,200 jobs
By PETER SVENSSON 10.29.08, 9:26 AM ET
NEW YORK -

Third-quarter profit fell 93 percent at Qwest Communications International Inc. and the phone company plans to cut 1,200 jobs, or slightly more than 3 percent of its work force.

The planned cuts disclosed Wednesday come as Qwest, like other traditional phone companies, are losing customers to cable and cell phones. Qwest's chief executive, Ed Mueller, also said the weak economy was a factor.

"We have taken a number of steps to keep our costs aligned with customer demand and maintain maximum financial strength and flexibility," Mueller said in a statement.

The Denver-based phone company, the country's third-largest, earned $151 million, or 9 cents per share, in the three months ended Sept. 30, down from $2.06 billion, or $1.08 per share, a year ago. The 2007 results were boosted by a tax benefit.

Revenue fell 2 percent to $3.38 billion from $3.43 billion a year ago.

Analysts polled by Thomson Reuters had expected the company to earn 10 cents per share on $3.33 billion in revenue. Analyst estimates typically exclude one-time items, like a $30 million net charge for severance benefits and a lease restructuring in the latest quarter.

Qwest also said it expects results this year to come in at the low end of its previous forecast, which called for which called for earnings before interest, taxes, depreciation and items, or adjusted EBITDA, to fall 1 percent to 2 percent.

Analysts were already expecting a 2.25 percent full-year decline in that earnings measure, which fell 6 percent in the third quarter to $1.08 billion.

Qwest ended the quarter with 11.9 million phone lines, down 8.9 percent from a year ago. The rate of decline is similar to the one reported by larger peers AT&T Inc. and Verizon Communication Inc.

Like AT&T, Qwest posted weak numbers for broadband recruitment in the second quarter but saw a minor rebound in the third quarter, adding 61,000 customers to its high-speed Internet service. Qwest has also increased its capital spending to improve its broadband service.

Services for large businesses were a bright spot, with revenue of $1 billion up 7 percent from a year ago, and Qwest said it had good traction with the government, getting contracts from the Department of Veteran Affairs, NASA and the General Services Administration. However, profit margins declined in the segment.

REDMOND, Wash. -

Microsoft's quarterly profit rose 2 percent. The company says it was buoyed through economic uncertainty by corporate customers that renewed licenses for servers and other business programs.

The world's largest software maker said Thursday it earned $4.37 billion, or 48 cents per share, in the most recent quarter. Sales rose 9 percent to $15.1 billion.

That was better than Wall Street was expecting. Thomson Reuters says analysts predicted Microsoft (nasdaq: MSFT - news - people ) would earn 47 cents per share on $14.8 billion in sales.

In the current quarter, Microsoft says it plans to earn 51 cents to 53 cents per share on sales of $17.3 billion to $17.8 billion. That's less than what analysts are currently expecting.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Pfizer Inc.'s profit tripled in the third quarter, mainly because a huge charge depressed last year's results, despite flat sales. Its earnings narrowly beat Wall Street's earnings expectations.

But the company behind impotence treatment Viagra and the top-selling cholesterol fighter Lipitor reduced its earnings forecast for 2008 even as it raised the lower end of its revenue forecasts for the year.

Its shares rose 44 cents, or 2.5 percent, to $17.78.

Pfizer said it earned $2.3 billion, or 34 cents per share, in the July-September quarter, up from $761 million, or 11 cents per share, a year ago.

Excluding one-time items, net income amounted to $4.18 billion, or 62 cents a share -- 2 cents a share more than analysts surveyed by Thomson Reuters expected.

In the current quarter, the New York-based company took a charge of $894 million for a settlement announced Friday to end most of the lawsuits over its withdrawn painkiller Bextra and another pain reliever still on the market, Celebrex. It also had $716 million worth of charges related to its cost-cutting program and other one-time items.

A year ago, Pfizer took a $2.1 billion after-tax charge in the third quarter, related to its decision to stop selling inhaled insulin product Exubera, which had dismal sales and then was linked to risk of lung cancer.

Pfizer said its revenue slipped to $11.97 billion from $11.99 billion a year ago, even though favorable exchange rates due to the weak dollar boosted sales by 5 percent. Analysts had been expecting revenue of $12.01 billion.

Pfizer reported a 13 percent drop in U.S. sales of Lipitor. Total revenues from Lipitor, the top-selling drug in the world, were down 1 percent at $3.14 billion.

The company said revenues for three drugs with recent generic competition -- blood-pressure medicine Norvasc, allergy drug Zyrtec and colon-cancer drug Camptosar -- fell by 48 percent, or a combined $627 million.

Several other drugs had double-digit sales increases, including Viagra, fibromyalgia drug Lyrica, schizophrenia and bipolar disorder treatment Geodon and Aricept for Alzheimer's disease. Celebrex sales rose 8 percent to $625 million amid a new ad campaign.

Pharmaceutical sales totaled $10.98 billion , animal health sales were up 11 percent to $708 million and other revenue dropped 9 percent to $289 million.

"We remain on track to meet our 2008 objectives, despite the turbulent global economy," Chief Executive Jeff Kindler said in a statement.

The company noted it has cut annual costs by a total of $1.7 billion from 2006 levels and now expects to get to $2 billion in reductions by the end of this year. Those cuts include reducing the work force by 14,600 people since January 2007. Job cuts and closure of several manufacturing plants helped slash Pfizer's cost of sales by 54 percent in the quarter, to $2.1 billion.

The company reduced its earnings per share forecast for 2008, to a range of $1.61 to $1.71, from $1.73 to $1.88, citing the Bextra settlement. It also raised the lower end of its revenue forecasts for the year, from $47 billion to $48 billion, but kept the top end at $49 billion.

"With our strong balance sheet and operating cash flow, we remain confident that we have the financial flexibility to successfully execute our strategies and meet our financial objectives in the face of the current macroeconomic environment," Chief Financial Officer Frank D'Amilio said in a statement.

For the first months, net income rose 45 percent, to $7.84 billion or $1.16 per share, from $5.42 billion or 78 cents per share in the January-September period of 2007. Revenues edged up 1 percent, to $35.95 billion.

Google just reported third-quarter results, and it managed to defy skeptics who thought it might finally fall victim to the poor economy. Net revenues of $4.04 billion were dead-on with analysts’ estimates, and profits before special items was $4.92 a share, handily beating expectations. The big reason: It reined in expenses, hiring fewer people and actually cutting capital expenses from a year ago.

Analysts had forecast $4.80 in earnings per share, minus special items such as stock option expenses, on net revenues of $4.05 billion after payments to partners that run Google ads on their sites. However, many analysts were informally assuming Google might come in slightly below their stated estimates and have been reducing estimates and price targets in recent weeks. A year ago, Google earned $3.92 a share.

In after-hours trading, Google’s stock, which closed up 4% today in a late rally along with the broader market, to $356.50 a share, was rising 10%, though that will likely vacillate after the earnings call. The stock had fallen 11% in the last three sessions for before today.

More from the release after the jump. And here’s CEO Eric Schmidt, which at the outset doesn’t indicate much about the future to my reading, except that he’s acknowledging the poor economy. However, he has done that before as well.

“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. 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.”

Google third-quarter results are less important as a sign of the times than what’s coming next. And partly because Google doesn’t provide earnings guidance, analysts are somewhat pessimistic. “There’s a lot of doubt about whether the 2009 estimates are too high,” says John Aiken, managing director of Majestic Research. Currently, the consensus is for 23% growth, but Aiken thinks 20% is more likely, and even 15% is possible.

Although Google has been largely shielded from the downturn so far, the now nearly certain prospect of a protracted recession seems likely to affect even search advertising, especially since it is driven significantly by small and medium-sized businesses. Perhaps to an even greater extent than their larger brethren, they face dropping consumer demand and a scarcity of capital thanks to the credit crunch.

And even if they keep spending on search ads, it’s possible consumers who click on them will end up deciding to buy less often, which would make them less effective for advertisers. A third-quarter study from SearchIgnite this week, for instance, did find one trouble spot: Retailers in particular are starting to reduce their search ad spending, down 10% in September.

So Google’s third-quarter results aren’t nearly as important as the prospects for the fourth quarter and 2009. We’ll hear more about this from the earnings call, which starts shortly. I’ll add what I hear after the jump.

Tidbits from the conference call:

Schmidt says traffic and revenue were "solid" and search query traffic rose in all vertical markets.

"The economic situation today is globally worse than what people were predicting just a month ago. ... But we're optimistic about Google's future."

New CFO Patrick Pichette noted that most geographies were strong, but mentioned the U.K. showed some weakness, up only 17% including currency adjustments. "Our core business continues to demonstrate strength despite a challenging economic environment."

Now cofounder and President of Technology Sergey Brin is talking about improvements in search, YouTube's various experiments in ads, and Android phones. Not much news you haven't heard yet.

He says more than 1 million businesses are using Google Apps.

Now on to analysts' questions. First, on the economy: Schmidt: "We see fluctuations, which are more complex than they may seem. Some things go up, some things do down." OK, Eric. He calls on Google economist Hal Varian: "It's very hard to tell what things are going to look like on a going-forward basis." OK, Hal. Now Jonathan Rosenberg mentions results may vary according to specifics on Google's quality adjustments on search ads. So, no real answer here.

Will economy prompt Google to cut costs, or delay investing in opportunities such as mobile. Schmidt: Google has shown courage when we need to ... as well as expense containment." Pichette talks about how Google will show discipline, but no specifics.

Question about whether Google is surprised at the reaction of advertisers to the Google deal. Sounds like they were, because Schmidt says, "Many of the complaints are based on the fact that many people don't understand how auctions work, or the benefits."

Question about whether advertisers are changing behavior because of the economy. Not really, says Varian: "Advertisers are willing to take all the clicks we can give them at the current CPCs (cost per click)," and he thinks that will continue regardless of the economy.

Question about impact of economy on retail given eBay's bearish outlook: Varian, as he did last quarter, still think Google could actually benefit as people are careful about shopping and search even more for better deals.

Question about improvement in margins--from cost cutting or change in advertising arrangements? Pichette: "Across all categories of expenses, people have been very diligent" in watching expenses. Hiring was less than in previous quarters. Capital expenditures were lowest since Q1 2006, another analyst notes.

Stock's still up about 9% in extended trading, so nothing on the call changed people's minds that this was an upside surprise.

Here's the earnings release:

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.

l 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.

l 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.

l 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.

l 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.

IBM Corp. released third-quarter results ahead of schedule Wednesday that beat Wall Street's estimates, sending the company's stock, a component of the Dow Jones industrial average, up 6 percent in after-hours trading.

The Armonk, N.Y.-based company also reaffirmed its full-year earnings guidance, a strong sign that IBM (nyse: IBM - news - people )'s core businesses are holding up well despite the deteriorating U.S. economy.

IBM's shares have tumbled 31 percent since July on concerns that IBM's exposure to the crippled financial services industry, which accounts for 30 percent of the company's sales, would hurt results.

The stock had been performing well for most of the year despite the ailing U.S. economy, rising 25 percent and hitting a 52-week high of $130.93 on July 24 before the shares started sliding.

IBM rarely reveals its quarterly results early but has done it twice so far this year. The last time was in January, when IBM reported sparkling profit for the fourth quarter - typically its most prosperous period - that was well above what Wall Street was expecting.

In both cases, IBM's stock price was falling and it wanted to reassure investors about the company's financial health in tough economic times.

IBM said after the market closed Wednesday that it earned $2.05 per share in the July-September period, four cents higher than the average estimate of analysts polled by Thomson Reuters. Net income for the period was $2.8 billion, an increase of 20 percent over the same period last year.

Sales increased 5 percent to $25.3 billion but fell short of Wall Street's expectations. Excluding the effects of currency fluctuations, IBM's sales increased 2 percent.

Analysts were expecting sales of $26.5 billion, but analysts had started lowering their estimates before Wednesday's announcement. They cited the deteriorating economy and a strengthening U.S. dollar as reasons for cutting their forecasts.

A strengthening dollar makes deals done in other currencies worth less when IBM accounts for the sales, which is done in dollars.

IBM maintained its forecast of at least $8.75 per share in profit in 2008, a 22 percent improvement over last year.

The results are reassuring in that they suggest that the biggest tech companies are still inking sales deals despite tightened spending, analysts said.

"It's relief, that's why the stock's rallying," said Peter Misek, an analyst with Canaccord Adams, adding that the technology sector as a whole could get a boost Thursday because of the positive signs from IBM. "It seemed like a global freeze happened in late September and extended, so it's nice to see the biggest companies are still dealing with the biggest of their suppliers ... the markets are still moving along, demand is still there."

IBM shares gained $5.35, or 5.9 percent, to $95.90 in after-hours trading, having closed down $5.10, 5.3 percent, at $90.55 during the regular trading session.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed.