Google Finally Gags As Its Latest Results Fall Far Below Views; Shares Sinking After Hours; Poor Q4 showing follows Yahoo's lackluster report, taking "air out' of group.(A)

Byline: PETE BARLAS

Google has finally laid an egg.

The Web's No. 1 search service badly missed expectations for its latest earnings Tuesday -- Google's first disappointing quarter since it went public in 2004.

The company posted fourth-quarter earnings of $1.54 per share -- excluding one-time items and stock compensation. That was up 67% from 92 cents in the year-ago period but far below analyst expectations of $1.76, according to Thomson First Call.

Google reported sales of $1.92 billion in the quarter, up 86% from a year earlier. Subtracting traffic-acquisition costs -- fees that Google pays its Internet advertising partners -- sales were $1.29 billion. That was roughly in line with analyst views.

It didn't help that Google paid a higher tax rate than expected, said CFO George Reyes. The company had heavier expenses overseas, so they made more of their profit in the U.S., thus incurring higher taxes at home, he said. Google had an effective tax rate of 42% in the quarter vs. an expected 30%.

"A greater percentage of our profits were taxed at a higher domestic tax rate, which resulted in a greater effective tax rate compared to our expectations," he said during a conference call.