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It looks like Google (NASDAQ:GOOG) will be saying 'Ha Ha' to all the option holders [who buy for the post-earnings volatility] and just stay right were it is on Friday.

The company posted a net income of $2.33 per share, a dime over expectations on revenue that was just above estimates ($1.67Bn vs. $1.64Bn expected). Do not pay any attention to the $2.46Bn revenue number, as that is gross before commissions and meaningless.

Be careful getting excited about all this, as the posted tax rate came in at 26% vs. estimates of 30% and so accounts for 90% of the beat. Last quarter also had a low reported rate of 27% so if they average 30% for the year (last year was higher with a 40% Q4) there will be hell to pay in the subsequent quarters.

Still, hitting those numbers, even after .16 of options expensing and after hiring an additional 1,152 employees (and these are no minimum wagers)... when you consider that an employee probably takes a good 3-4 months before they begin producing and that start-up costs (training, office space, funiture, HR...) it really is an amazing thing.

Google's share of the search market is now 44.7%, up from 36.9% last year, so there seems to be some diminishing returns to the earnings. I don't know why this doesn't seem to concern any analysts I've heard so far, but if they are moving 21% more "product," then a 21% increase in revenue is not very surprising or in the least bit impressive.

Will the company be able to put the breaks on runaway spending when they top out at a 60% market share? What if there is a price war? What if Microsoft (NASDAQ:MSFT) or Yahoo (NASDAQ:YHOO) finally get on the ball? Microsoft's report today underlines that you just cannot count that company out, no matter how many bone-headed mistakes they make along the way - just check out those XBox sales!

The bottom line is that Google may indeed earn a very impressive $10 per share this year but, unless they come up with a new revenue stream, I think they may be getting near a top for search revenues.

If they double up to earn $20 a share in just 2 years and the stock price stayed the same, that would still give them a p/e of 20, higher than Microsoft is now and equal to Yahoo's current value - that's a pretty big gap to fill without something major coming down the pike.

Related:

Source: Google, Time to Find a New Revenue Stream