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Computerworld - As Google Inc.'s earnings and optimism continue to rise, analysts are cautioning the Internet giant to beware of taking costly missteps with its bankroll and its focus.

Google late last week reported that its third-quarter profit was its best since it was founded 11 years ago. And unlike some other major tech companies, Google wasn't hurt by the dismal economy, as its sales were up 7% from the same period last year.

With those positive numbers came news that Google plans to hire a few thousand people and spend some of its capital on promising start-up companies. Those plans come less than a year after Google had announced plans to lay off 100 recruiters and shutter engineering offices in Texas, Norway and Sweden.

Industry analysts are split on whether Google's strengthening financial position is a bellwether for the rest of the technology industry. But nearly all of them cautioned that Google should maintain its focus -- which, they note, can be a tough task for a company with coffers full of money and opportunities around every corner.

"Google is strong right now, very strong," said Dan Olds, an analyst at Gabriel Consulting Group Inc. "With revenue up and a huge war chest, they can make just about any move they want. This becomes even more significant in an environment where acquisition prices are at rock bottom due to the economy. Google is a rich, fat kid in a candy store that's having a going-out-of-business sale."

Olds said it can be confusing and risky to be that rich kid.

"For Google, there aren't any real constraints," he added. "They can go in any direction they want, which is dangerous. They could squander their energy trying to go in too many different directions."

Rob Enderle, an analyst at Enderle Group, agreed that a company with cash to burn in buyer's market can be in a dangerous position.

"Google could generate a substantial amount of complexity over a very short period of time and run the risk of creating a company that is unmanageable," he added. "Yes, there are bargains to be had, but Google needs to show they can make past acquisitions, like YouTube, profitable. There's the feeling of throwing [stuff] against the wall in the hopes that something will stick and the result will be beneficial."

On the other hand, IDC analyst Caroline Dangson said Google needs to prove that it can be successful outside of its Internet search business. One way to do that is by acquiring companies that are creating innovative technologies in areas that Google is not involved in, she added.

And Ezra Gottheil, an analyst at Technology Business Research Inc., said Google has shown strong discipline in the past, so it will likely avoid spreading itself too thin.

"They're practiced in acquisition," he added. "They're not about to neglect their main business. They've become more disciplined, which is helpful. In the past year, they've eliminated a number of unproductive products and initiatives, including Notebook -- a Web-based clipping file, which I miss -- and television advertising. When the market slowed down, they started to act more like a business."

Google, said Gottheil, has a lot of money and an opportunity to play with it, but execs there know that they need to have a plan and keep to it.

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