Mr Reyes, who has not run the finance department of a public company before, sparked a sell-off in Google shares on Tuesday morning as he told another investor conference that the company’s revenue growth was running out of steam. The gaffe, which was hastily corrected by Google investor relations officials, who issued a statement to clarify the remarks, was the second event from the finance department to wipe billions from Google shares in as many months.

The company caused a massive sell-off when it failed to meet Wall Street profit forecasts for the fourth quarter of the year. Mr Reyes blamed his failure to calculate correctly the amount of tax the company should pay on its earnings.

Google’s shares yesterday regained some of Tuesday’s losses as they rose less than 1 per cent to $364.80 at the close on Wall Street, yet they are still a long way from the $395 that they reached before Mr Reyes made his unexpectedly frank remarks.

Most analysts who spoke to The Times last night said that Mr Reyes’s remarks had been taken out of context, but that the massive sell-off was a clear indicator that Google’s shares were very overvalued.

Analysts also acknowledge that Google is under pressure to find new revenue streams and that the company has so far given little concrete information about how it will address the problem.

Microsoft is also stepping up the pressure on Google. The software giant, frustrated by Google’s success, said last night that it is six months away from launching a rival search engine in America and Britain. The search engine will be embedded in Microsoft software, so that users will not have to visit the Google website separately when searching the internet.

Microsoft believes that the new development will help it to steal much of Goggle’s market share on its home turf. “What we’re saying is that in six months’ time we’ll be more relevant in the US marketplace than Google,” Neil Holloway, Microsoft president for Europe, Middle East and Africa, said.

“The quality of our search and the relevance of our search from a solution perspective to the consumer will be more relevant.”

Microsoft has run into trouble with regulators in the past for trying to squash competition by bundling software with its existing applications, however. The European Commission and courts in the United States found Microsoft guilty of violating competition laws after complaints about bundling from Netscape, the web browser company, and Real Networks, a maker of music and video software.

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