Business Highlights

SAN FRANCISCO — Google Inc. shares fell 1.7 percent Thursday after the online search engine leader disclosed it would sell another 5.3 million shares as the company’s stock is added to the Standard & Poor’s 500 index.

The sale could make it more difficult for Google to meet the lofty earnings expectations that have turned the company into such a hot commodity.

Its shares fell $6.54, to close at $388.44 Thursday on the Nasdaq Stock Market. The share sale plans were disclosed after the markets closed on Wednesday.

The move comes just two days before Google’s stock will be added to S&P’s best-known index — a breakthrough that snapped the company’s shares out of a recent funk and presented management with an opportunity to capitalize on the surging demand.

In a Securities and Exchange Commission filing late Wednesday, Google said it expects to sell the 5.3 million shares primarily to index funds who must own a stake in the company because it’s now in the S&P 500. Google’s market value had shot up from $341.89 since S&P announced its decision to include the company’s stock in the blue-chip bellwether.

Based on the stock’s morning price Thursday, Google’s offering would raise about $2.05 billion.

By issuing more stock, Google will have to boost its profits to match the average earnings-per-share estimates of industry analysts. That yardstick is widely used to gauge a company’s value. Some investors already had been fretting about Google’s earnings outlook, so the addition of more stock compounded those worries.

Ex-manager claims Kodak wanted to compress images stored on Web site

ROCHESTER, N.Y. — An Eastman Kodak Co. manager claims she was fired for protesting a cost-saving proposal that would have quietly compressed millions of digital images stored by customers on the world’s leading online photography site.

While acknowledging it has discussed ways to cut back on the rising cost of online storage, Kodak insisted Thursday it would never condense images in a lower-resolution format — and thereby potentially diminish their quality — "without our customers’ knowledge.”

"It’s an issue I’m sure all online photo services are discussing” as the image capacity of newer digital cameras expands, said David Rich, vice president of marketing at the Kodak EasyShare Gallery. "However, we have not made any plans nor any decisions about any compression of existing images within our service.”

Maya Raber, former director of software development at the online unit in Emeryville claimed in a lawsuit that her job was eliminated in August because she opposed a plan to shrink disc space and save Kodak money by compressing more than 800 million photo files owned by about 13 million active members.

Briefly ...
Economy hits rut: The economy was lethargic in the final quarter of 2005, but fresher readings suggest a rebound since then.

Gross domestic product grew at an annual rate of just 1.7 percent in the October-to-December quarter, the Commerce Department reported Thursday. It was the most sluggish showing in three years but still a tad better than the 1.6 percent estimated a month ago.

The slight upgrade reflected stronger inventory building by businesses than previously thought.

Stephen Stanley, chief economist at RBS Greenwich Capital, summed up the fourth-quarter performance as "pretty dismal,” but he added: "Of course we, along with everyone else, look for a snapback” in the current January-to-March quarter.<