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Google and Microsoft’s Quarterly Earnings Disappoint; Trouble Ahead for Both?



Both Google (GOOG) and Microsoft (MSFT) reported quarterly earnings yesterday evening: it was not a pretty picture for either company.

First up, Google.

  • Net income of $1.25 billion
  • Revenue of $5.37 billion
  • Q2 earnings of $4.63 with Wall Street expecting $4.74

The Analysts said:

Analysts noted that Mr. Schmidt had made reference, for the first time, to the “more challenging economic environment” in his prominent statement on Google’s earnings release. They also observed that Google had taken the unusual step of having Hal R. Varian, its chief economist, on the earnings call with investors and analysts.

Google said:

“We’re very well positioned in a slowdown especially if it gets worse,” said CEO Eric Schmidt, who added there would be “a flight to quality” if the economy tanked.

Some of the softness in Google’s advertising revenue, moreover, was self-inflicted. Jonathan Rosenberg, Google’s senior vice president for product management, said that Google had chosen to reduce is advertising coverage — the percentage of Web pages on which it displays advertising — to an all-time low.

“There is some evidence we have been a little more aggressive in decreasing coverage than we should have been,” Mr. Brin said.

Next Microsoft.

  • Operating income of $5.68 billion
  • Revenue of $15.84 billion
  • Q4 earnings of $0.46 with Wall Street expecting $0.47

The Analysts said:

"The core business did well, but we were looking for a little bit more out of the Internet advertising business, and expenses were too high," said Andy Miedler, an Edward Jones analyst.

Microsoft said:

Chief Financial Officer Chris Liddell said during a conference call with analysts that heavy spending on the division — from data centers to employees needed to sell online ads — is likely to continue. "The Yahoo transaction would have accelerated our progress," Liddell said, "I can’t promise you you’re going to see massive turnaround in the short term."

  • http://www.greatpriceshere.com Nicole Price

    In both cases there has been wisdom by hindsight but no proactive suggestions for the next quarter!

    Nicole Price’s last blog post..Make Your Party a Roaring Success

  • http://www.marketingpilgrim.com Andy Beal

    @Nicole – very nice observation.

  • http://foolishmumbles.com Top Rated Digital

    Yea, trouble for sure . . . HA! I wish my business had those kinds of troubles.

    Top Rated Digital’s last blog post..What’s The Top Rated Canon Digital Camera?

  • http://www.erikvossman.com Erik

    I don’t think this spells trouble at all. For one thing, everyone new it was coming. In tough times for businesses, what are you cutting first. Advertising. GOOG was bound to miss estimates sooner or later, I think it was impressive they didn’t last time…

    As for MSFT, well, they have to make some adjustments but still in the game. I just think this spells great buying opportunities for those who invest, nothing more for marketers and web entrepreneurs.

    Maybe look for some new products and deals from the two companies to encourage more spending in areas that were hit.

    Erik’s last blog post..Surrounded by Freelance Entrepreneurs

  • http://www.gadgets4nowt.co.uk PS3

    I didn’t look much of a problem at first glance but Google is actually just under 15% on Wall Street’s expectations. That is a pretty significant.

  • http://www.erikvossman.com Erik

    PS3>>> Significant yes, comparatively speaking. But worth a 10% decline in their stock price? I’m not so sure about that. This stock is being sold purely on emotion not on the fact that they are coming out with all these new products, increasing their distribution load (pageviews) and acquiring businesses that have no other choice but to increase profits.

    I for one am glad they missed their mark. Now I can buy them at a discount.

    Erik’s last blog post..Surrounded by Freelance Entrepreneurs

  • http://www.bmgsurvey.com/ Travel Point

    Trouble for them is trouble for the internet industry.

    Travel Point’s last blog post..The Samba of Brazil

  • http://www.netage.co.za Goran Web Design

    In many instances companies cut advertising expenditure when times get tough. I can only see an increase in advertising spend on-line as companies are looking for the less inexpensive, forms of marketing that bring results.

    I would there for assume that the branding “type” marketing methods would take the knock and not on-line.

  • http://payperclickjournal.com Nick Stamoulis

    When the going gets tough, advertising is always to go, but PPC is a form of direct marketing as well. Wouldn’t be great if we all saw PPCs across many industries drop for once?

    Nick Stamoulis’s last blog post..Are You Familiar With These PPC Terms?

  • http://www.rcplinks.com/ Rcplinks.com

    Indications of trouble not just to these two companies but to the global economy.

  • http://mp3leben.com Tiffany

    This is could be a good thing for Yahoo to be considerate before make choice :). Stacey loves rich guy…

  • Pingback: Switched on's Blog | SEM and SEO Industry Experts | Switched on Media » Blog Archive » We Asked 100 People About Yahoo’s Q2: Yahoo Said “Strong;” Our Survey Said…

  • http://oneyearmillionaire.net Millionaire

    it may be disapointing for some… but i know some people would be happy with positive earnings… as long as your not in the (-)

    Millionaire’s last blog post..Richkiss.com (Meet Rich People Online)