If there's a recession on, you would hardly guess it from the earnings reports from Microsoft, Google, and IBM. In terms of revenue, Microsoft beat Wall Street expectations with an 18-percent rise to $15.64 billion over Q2 2007. Yet the Street pummeled Microsoft's stock by 5 percent due to lowered guidance for the year and lower-than-expected profits, hinting at problems in the company's newer businesses like online and XBox.
In sum, Microsoft's old businesses (Windows was up 15 percent, Tools, etc.) are thriving, but it can't seem to get a foothold in the new world, with its online services business scraping to a $488 million loss. Its Office business also grew two percentage points slower than expected (14 instead of 16-percent growth), but this is probably a momentary blip compared to the continued costliness of trying to break onto the web in a meaningful way and owning the family room with the XBox.
Meanwhile, Big Boring Blue (IBM) boosted its profits by 22 percent over 2007 and revenue by 13 percent, bolstered by IBM's growth in emerging markets.
Revenue in the Americas, IBM's biggest market, rose 8 percent, or 6 percent adjusting for the impact of the weak dollar. Sales in its Europe and Middle Eastern sales region grew 20 percent, while sales in Asia climbed 16 percent. The company, like other tech giants, has said it expects overseas strength to compensate for a weak U.S. economy.
IBM is the trusted grandfather figure in an iffy economy, a vendor that may be overpriced but is also very safe.
Well, Google seems to be suffering from the sheer magnitude of its promise. The company grew revenue by 39 percent over 2007 to $5.37 billion, but Wall Street punished its stock by over 10 percent in after-hours trading largely due to a marked deceleration in its paid clicks growth (20 percent, down from 30 percent in Q4 2007 and 45 percent in Q3 2007).
In other words, Google also suffers from the vulnerability of the larger advertising market, even as it takes a growing share of that market. Right about now, Google might be praying for a monopoly that is more dependable than its online advertising monopoly...like Microsoft's desktop dominance. Google is selling what everyone should have; Microsoft is selling what everyone already does have...but could use a little more of.
IBM? It's trying to reshape the world in America's image, one server and consultant at a time.
Regardless, despite Wall Street's judgment of the three companies, all are doing quite well. It's impressive to see companies as big of these grow at such significant percentages.