Microsoft, Google disappoint analysts

18-07-2008

by Deirdre McArdle

Although both Microsoft and Google posted higher profits, cautious outlooks from the tech giants caused their shares to tumble in after-hours trading.

Microsoft posted a 42 percent rise in profits for its fiscal fourth quarter, compared to a year ago when the firm's bottom line took a hit on Xbox-related charges. Profits for the quarter amounted to USD4.3 billion, or USD0.46 a share, compared with USD3.04 billion, or USD0.31 a share, a year earlier. Revenue increased by 18 percent year-on-year to USD15.84 billion.

"Looking forward, despite difficult economic conditions, we will build upon the momentum exiting fiscal year 2008 and expect to deliver another year of double-digit revenue and earnings growth in fiscal year 2009," said Chris Liddell, chief financial officer at Microsoft.

Despite the positive results, Microsoft was restrained with its outlook for its first fiscal quarter 2009. The firm said it expects earnings per share of USD0.47 or USD0.48 on the back of revenue of between USD14.7 billion and USD14.9 billion. Wall Street analysts on the other hand had anticipated per share earnings of USD0.49 on revenue of USD15.04 billion.

Meanwhile, Google released its second quarter financial results on Thursday. The search giant posted a 35 percent jump in net income to USD1.25 billion compared with USD925 million in the second quarter of 2007. Revenue was up 39 percent year-on-year, to USD5.37 billion, from USD3.87 billion a year earlier.

Despite the revenue and profit growth, Google's results disappointed analysts. The firm posted earnings per share (excluding the cost of stock options) of USD4.63; Wall Street had been expecting per share earnings of USD4.74.

Google CEO Eric Schmidt was happy with the firm's quarter although, like Microsoft's management, he did allude to the global economic downturn. "Strong international growth as well as sustained traffic increases on Google's web properties propelled us to another strong quarter, despite a more challenging economic environment."

Both Microsoft and Google's share prices took a tumble in after-hours trading as twitchy investors reacted to the hint that the tech giants are not immune to the current economic climate. Microsoft shares dropped by around 6.5 percent in New York on Thursday evening, while Google's were down around 7.5 percent.

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