Google and Microsoft show signs of weakness

Google’s third quarter results disappointed investors as the company reported a 20 per cent drop in profit year on year and revenue missed analysts’ expectations.


The announcement followed a shock premature filing, which Google blamed on its financial printers accidentally publishing its results two hours early.

The blunder, which some commentators said showed up 14-year-old Google for its immaturity, knocked $20bn (£12.5bn) from its market value and resulted in its shares being suspended for a short time.

Google’s share price is still down 8 per cent to $60.49 (£37.67) at the time of writing as it reported profits dropped to $2.2bn (£1.4bn) in the three months to October. This was largely due to costs relating to the completed purchase of loss-making ($527m – £328m in the quarter) mobile manufacturer Motorola Mobility, which it has been struggling to turn around against stiff competition from the likes of Apple, Samsung and HTC.

Revenue rose 45 per cent year on year to $14.1bn (£8.8bn), with $1.2bn (£747m) of that coming from the UK.

The price Google charges advertisers when users click on ads dropped for another successive quarter, which highlights Google’s struggle to convert the increasing amount of mobile users into meaningful revenue. Cost per click decreased 15 per cent year on year and 3 per cent quarter and quarter.

Larry Page, Google’s CEO, however, is confident that Google will be able to better monetise its mobile offer soon.

Speaking on an analysts’ call he said: “Google is super well-placed to take advantage of these disruptive opportunities. Why? Because our search query volumes have grown this quarter as measured year over year and we are seeing tremendous innovation in advertising which, I believe, will help us monetise mobile queries more effectively than desktop today. Indeed, our mobile monetisation per query is already a significant fraction of desktop

“In short, as we transition from one screen to multiscreens, Google has enormous opportunities to innovate and drive ever higher monetisation. Just like search in 2000.”

Paid clicks, which indicate the popularity of Google’s advertising offer, rose 33 per cent year on year and 6 per cent quarter on quarter.

Elsewhere, Google’s hardware, search and software rival Microsoft also posted a greater than expected dips in profit and revenue in its third quarter.

Revenue fell 8 per cent year on year to $16bn, while profit dropped 22 per cent to $4.5bn, which it blamed on consumers holding off buying new Microsoft products until the launch of new operating system Windows 8 and its Surface tablet, which are both due at the end of this month.

Microsoft is reported to be launching a $1.5bn global marketing campaign as it looks to drum up interest for the products ahead of the traditionally competitive pre-Christmas buying period. Investments in the new products were also blamed for the dip, alongside slowing PC sales across the market as consumers opt for more mobile devices.

Steve Ballmer, Microsoft CEO, says: “The launch of Windows 8 is the beginning of a new era at Microsoft. Investments we’ve made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers and partners.”

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