More bad results from the US tech sector

After IBM and Intel yesterday, Google and Microsoft have both published disappointing results. Is someone poisoning the water in Silicon Valley?

by Emma Haslett
Last Updated: 23 Aug 2013
What’s going on in Silicon Valley (or, in Microsoft’s case, Seattle)?

Yesterday we reported on Intel and IBM’s lower-than-expected profits. Today, another pair of technology leviathans (leviatha?) have disappointed investors: shares in Google and Microsoft both dropped this morning after they reported results which weren’t up to scratch.

To be fair, you can’t exactly call either performance ‘poor’. While Google reported a 19% rise in revenues to $14.1bn in the three months to June, Microsoft’s revenues hit $19.9bn, a 10% rise.

Nevertheless, the pair have both missed analyst forecasts – which means the inevitable fall in shares. In pre-market trading, Microsoft’s share price dropped by 6.43%, while Google’s fell by 3.6%.

What’s behind the disappointing performances? In Google’s case, it blamed a new advertising system which was supposed to help advertisers build promotional campaigns on mobile devices, but actually led to a 6% fall in the revenue it makes from each ad. It also shelled out $12.5bn to buy mobile phone manufacturer Motorola Mobility, which this morning reported a loss of $998m, up from $843m. So that can’t have helped investors’ confidence.

Microsoft’s troubles are arguably more serious: as we reported earlier this week (and again yesterday when Intel posted its results), PC sales are plummeting – and despite its launch this year of the Surface RT tablet, the majority of Microsoft’s business is software for desktop and laptop computers. And its attempt to corner the tablet market hasn’t exactly been a success: it was hit by a $900m charge related to weak demand for Surface and unsold inventory.

Last week, Microsoft chief executive Steve Ballmer unveiled details of a massive reshuffle at the company, saying it would ‘operate holistically, not as a set of islands’.

So all these disappointing results could just be a blip for Microsoft, Google, IBM et al. Or it could be sign of something more endemic in the US tech scene. Pretenders to the tech giants’ thrones: start your engines.

Find this article useful?

Get more great articles like this in your inbox every lunchtime