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Stocks slide as the electronics giants disappoint

While Intel Corp.'s Q2 2008 results were quite impressive, not everyone came out of the quarter quite as strong as Intel did.  AMD followed Intel in announcing quarterly earnings, and it contrasted Intel's gains with losses that were worse than expected.  Now Microsoft and Google have followed in AMD's suit, each announcing earnings that disappointed in their own ways.

Google was a victim of its own success to some extent.  With half of its revenue coming from the U.S., the company showed a troublesome slowing in advertising click-throughs, thanks perhaps to the struggling U.S. economy.  Google puts partners' text ads beside search results and is then paid when visitors to the search engineer clicked the links.

It was used to seeing rapid growth in traffic throughout its history and this yielded rapid growth in clicks.  Last year, the quarterly growth was 47 percent.  This year growth had slid to 19 percent, which for anyone besides Google would have been very impressive.  However, for Google, this meant that its profits were not as high as expected, and it disappointed analysts' lofty expectations.

It posted a profit of $4.63 a share, well below the average of $4.73 a share, which a Bloomberg compilation of analyst projections predicted.  Partly to blame also were rising costs of operation.  Google saw its research spending budget rise 65 percent.  It also languished under the legal war of attrition it has been waging against Viacom over its video sharing property YouTube.

Thanks in part to the extra overhead from defending itself against Viacom, Google's general and administrative costs rose 49 percent to $475M USD.  Google also was nonplussed to see employees leaving the company, a foreign experience for the company who promoted a "lifer" mentality among its workforce thanks in part to feel-good perks.

Microsoft also felt some heat from its Q2 results.  The company, which gets 60 percent of its income inside the U.S., disappointed analysts with only producing a profit growth of 42 percent, yielding $4.3B USD in profit (42 cents a share).  Analysts predicted stronger profits of 47 cents a share. 

Its problems stemmed in part to sliding Microsoft Office sales, which were thought to be negatively impacted by piracy.  The sales missed the company's goals for a second straight quarter.  Worse, Microsoft saw its online advertising missing targets and losing ground to Google.  Overseas Microsoft showed more promising growth, but this growth was unable to offset its slippage in the U.S.

Brian Rauscher director of portfolio strategy at Brown Brothers Harriman & Co. in New York says this is to be expected, and that there is little Google and Microsoft can do to escape the reality of the U.S. economy's struggles.  He said, "For any U.S. company, the domestic part of their products are going to come under pressure.  The U.S. consumer is getting pinched."

Jerome Dodson, chief executive officer of San Francisco- based Parnassus Investments, which has $1.4B USD in investments, including holdings in Google and Microsoft stock, stated "You can't consider technology a defensive sector at all.  We're going to have a small sell-off in technology."

Even Google CEO Eric Schmidt admitted that his company was struggling under "a more challenging economic environment."

Microsoft and Google paid a heavy price for falling short of expectations on the stock market.  Google stock fell $52.12, or 9.8 percent, Friday, its worst loss since its 2004 initial public offering.  Microsoft saw slightly less severe, but still grim, losses $1.66 a share, or 6 percent, its own worse loss since April 25 of this year. 



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RE: Leave Microsoft Alone!
By wordsworm on 7/21/2008 9:00:43 AM , Rating: 2
I guess you missed the article he wrote about MS's new business model in respect to its Office Suite. http://www.dailytech.com/Microsoft+to+Offer+Office...

Do you think it's possible that he's interested in MS? If this was a story about how Yahoo had lost market share or profit, I'm sure you'd be gleefully slamming the founders for it.

I think Mick and Brandon are the two that regularly draw me to DT. I can't stand Michael's anti-environmentalist propaganda, but you won't see me attacking him as a writer for it.


RE: Leave Microsoft Alone!
By Master Kenobi (blog) on 7/21/2008 9:19:09 AM , Rating: 2
quote:
I think Mick and Brandon are the two that regularly draw me to DT. I can't stand Michael's anti-environmentalist propaganda, but you won't see me attacking him as a writer for it.

That has more to do with you than them. Your merely seeking out information that already adheres to your previously held beliefs. You prefer their writing because it calls in line with what you believe. You dislike Masher2's writing because it directly conflicts with what you believe in. While this is not abnormal, people tend to prefer information that confirms or supports their beliefs, it is however not analytical.


RE: Leave Microsoft Alone!
By Icelight on 7/21/2008 10:58:50 AM , Rating: 3
Personally, I can't stand the "black, white but absolutely nothing in between" attitude.


RE: Leave Microsoft Alone!
By wordsworm on 7/21/2008 11:46:43 AM , Rating: 2
I dislike Masher2's writing because it promotes an irresponsible attitude towards the environment.
quote:
While this is not abnormal, people tend to prefer information that confirms or supports their beliefs, it is however not analytical.
This is precisely what most people do. He's no exception. Anyways, my point wasn't to attack him, just to say that just because he promotes the dark side it doesn't mean I'm going to attack him personally, which is something a lot of folks recently have been doing to Mic.

Anti-environmentalists will do or say anything to promote their desire to offload responsibility. I know lots of religious folks - have them in my family - who figure all the world and the nature in it is there, made by God, just for the use and abuse of mankind. But, as I said earlier, it's not important. What is important is that I respect Mike's opinions and that I voice my own.

quote:
While this is not abnormal, people tend to prefer information that confirms or supports their beliefs, it is however not analytical.


This is usually the case. I don't agree with everything Mick says. Being fully against the use of nuclear energy clearly sets me against his beliefs. So, he doesn't necessarily reflect my beliefs. What I like is the fact that he will at times counterbalance the other stories. His comments about Apple often counterbalances the PC die-hards (of which I consider myself one, though not necessarily of the MS variety).

Anyways, my point is people shouldn't disrespect him or his style. I enjoy his stories, and I'm sure that many folks here do.


RE: Leave Microsoft Alone!
By mindless1 on 7/21/2008 6:59:27 PM , Rating: 2
Something to keep in mind is that at Dailytech, there is an unusually large % of posters who are biased towards MS. A % significantly higher than you'll find at many other tech 'sites. It makes one wonder sometimes, what their true motivations are.

Mick just gets caught in the middle, by reporting about something bad but let's face it, that's what you see on the *news* too, on TV and radio because apparently that's what the public wants to hear about. Who didn't already know MS had such a successful business, that Windows and MS Office dominate? Same goes for Google in their respective market. Some things just don't need to be said because they are so obvious.


RE: Leave Microsoft Alone!
By jonmcc33 on 7/22/2008 7:32:05 AM , Rating: 2
quote:
...there is an unusually large % of posters who are biased towards MS.


ROFL! It takes a big person to admit when they're wrong. Think on that a while.


RE: Leave Microsoft Alone!
By wordsworm on 7/22/2008 8:30:18 AM , Rating: 2
MS is under erosion from a number of different fronts - Apple, Ubuntu, and Open Office are all slowing gaining market share while MS is giving it up. Heck, I've gotten so used to open office that I'm now better with it than I am with MS Office - though I do miss MS Word - but that has more to do with the fact I haven't learned all the features OO-Writer has.

You know, OO is really awesome. I was having a little problem doing a relatively small thing. I sent an email to them about the problem. Less than a week later I got an update, and they'd fixed the problem. That's just awesome. Try doing that with MS. Better service for free. MS=no service unless you have big $$. MS is digging its own grave with its greedy business policies. Of course, Apple is a step in the wrong direction, so I'm not happy with that. On the other hand, Apple has been putting out superior products in some key ways than PC has for a long time. I don't know if those key areas are still an issue for PC vs. Mac. I'm referring to latency, which is an important issue for some kinds of computing, such as audio and video. Apple for a long time has dominated that field because PC failed to have competitive products. These days, as far as I know, PC is the equal of Apple in these regards as well.

quote:
there is an unusually large % of posters who are biased towards MS

I agree with that. There are a lot of Apple bashers. I detest Apple with the same lot, but I hate aligning myself with them for the way they go about it. It's quite belligerent.


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