Operating expenses totaled 862 million. payroll. Non gap operating profit was $1.2 billion on margins of 37 percent down from 38 percent. You should expect continued growth in headcount. Not surprising. Google will implement new stock option plans for employees in Q2. Stock-based compensation will be $621 million. CapEx was $367 million in quarter. $1.9 billion for the year. In 2007, they expect to make significant capital expenditures. We had a very healthy q4 across the company.

Larry Page

Serving our users was the no1. priority . Search performance. We continued to invest in the global infrastructure that supports our search. Our index. Since users are interested in many types of industry. Added the ability to search for code and patent. Google now links to YouTube. We are working on integrating different types of results in one place. We are excited about providing a truly seamless user experience in search. Made improvement to search quality. opened new engineering facilities outside U.s.

Sergey Brin

Ad quality is something we have been focusing on. In the fourth quarter, showed more ads in commercially oriented searchers. Monotization has improved. Our enhanced content-targeting program increased relevance. We also launched the custom search engines. We paid over $3 billion in 2006 to our partners, We expect this will increase. More brand advertising is coming. In 2006, we expanded off-line. The ablity to offer premium on and off line allows google to provide a complete solution. Feedback on Google Checkout has been good. Checkout benefited merchants. WE now have 25 percent of the Web's top merchants. We expect this momentum to continue as we expand checkout beyond the US. (I'll want to see more proof of this)

Eric Schmidt

Many more content partnership are coming in 2007.

Anthony Noto -- Goldman

Paid clicks

Jonathan Rosenberg

The thing you need. If really want to get a measure, There are bunch of other things that impact CPC Biggest thing is growth rate, Newer markets have lower prices. With Adsense. There is no data that suggest that on an apples to apples basis that we are seeing a decline in cpc in like keywords

George Reyes

We had a very good session with our Ernst & Young accounting firm. We agreed with their position that Google checkout revenue will be accounted for as contra revenue. Affected 1 percent of totasl revenue

Mark Mehaney Citigroup- HAve merchants spent more with Google because of Checkout? What about users?

Sergey Brin-We know that users are drawn to Checkout badges. We've seen substantial increases in their likeliehood of clicking on ads,

B of A: New products launches on mobile. When will mobile have an impact?

Eric Schmidt: IT's clear that 2007 is the year that mobile search grows signgficiantly. We're investing in new categories of mobile content. It's not material today in a financial sense. We are making a significant investment, won't see impact until 2008

Robert Peck Bear Sterns: YouTube,

Eric Schmidt--We don't break out revenue. Focused on user adoptoin. Looks like early returns. "We very, very pleased" with YouTube. This year, they will offer some revenue with content partners. We want to respect the copyrighted, We are in development of a number of technology solutions.

We're going to experiment with different alternatives (for advertising at YouTube). The real value we have.

Mary Meeker Morgan Stanley (Sub) --Dmarc tests? Revenue generator in 2007?

Omid Kordistani (sp?) - Audio is abig focus. It's early to tell. We are making great progress with advertisers.

Jonathan Rosenberg -- Dmarc was pretty robust in terms orf scope. Had 700 radio stations

Safa Ratstchy --Piper Jaffray (longtime google bull) Partnerships, were are you in terms of profits?

Omid Kordistani -- IN general, we are very pleased with partnerships. Some of the major partnerships for AdSense (For a sales guy he seems nervous).There's actually some nice growth with these partners. We are doing a lot to improve the quality of the content network.

Ben Schacter -UBS (really sharp analyst) Interest in health care and capex

Sergey Brin -- Our interest in health care was driven by request we've gotten from govt. It's not something we are looking to drive the P&L. We are still investigating where we can make the most useful contribution

George Reyes--Doesn't really answer the question about whether capex will rise faster than revenue,

Imran Khan-UK performance.

Jonathan Rosenberg--Market is different, people plan vacations earlier

Jordan Rohan RBC Capital Markets. YouTube content deals? How are they accounted for?

Eric Schmidt -- YouTube is busy doing a bunch of interesting deals. It was improtant that the cone

Justin Post--Merril. Advantages of expanding google platform to traditional media

Omid Kordistanti -- PRovided the widest reach possible and efficiency.

Jonathan Rosenberg--One of the things we provide is real time reports on when the ad played (in radio). Same is true with print.

Christa Quarels Thomas Weisel-- Asia question, Will YouTube become Google video?

Eric Schmidt --We're pushing verym very hard for the success of YouTube as a brand.

Larry PAge--We are taking the time to do the integration to preserve the value of Google Video and YouTube. We have not traditionally hired lots of people to make content.

Heath Terry-YouTube

Eric schmidt--We know that people whouse YouTube are very fanatical about it. Trying to connect copywright owner to end user

Doug Anmuth --Lehman Bros. Early returnins with personalizing search.

Larry Page -- The quality improvements we made in personalized searhc. We are very excited about personalization.

Blogging was interrupted by fussy baby but Eric Schmidt did make some interesting remarks about Google's interesat in the television advertising market.