Profits up for Google and Microsoft

Profits up for Google and Microsoft
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Google’s core Internet advertising business saw its net revenue rise by 23 percent in the first three months of the year even as its Motorola mobile phone division suffered a sharp decline.

Analysts said Google does seem to be holding its own in the rapidly changing technology landscape where consumers increasingly use mobile devices instead of PCs.

“Google eked out an acceptable quarter, but it wasn’t easy,” said Stifel Nicolaus analyst Jordan Rohan.

Google’s search advertising business remains solid but unexciting, Rohan said.

He noted that Google’s adjusted profit of benefited from a significantly lower tax rate due to a retroactive research and development tax credit. Without that benefit, Rohan said Google would have missed Wall Street’s earnings target.

Different is vital

Releasing the results, Google CEO Larry Page focused particularly on new products such as the Google Glass wearable computers and high-speed fiber networks that the company is developing, which he said were vital to the company’s future success.

“If you look at most companies they never do anything different, and eventually they run into problems for that reason,” said Page.

He said the new lineup of yet-to-be-released Motorola devices would offer a variety of improvements over current smartphones, with features such as longer battery life and better resistance to shattering or damage from spilled drinks.

Microsoft surviving PC sales decline

Microsoft’s quarterly results came in better than expected.

Its strategy of selling more long-term licenses for Windows and Office software to big business customers is helping to cushion the blow from plummeting sales of personal computers and a faltering start for its Windows 8 operating system.

Personal computer sales fell 14 percent in the first three months of the year, just as Microsoft tries to ramp up sales of the latest iteration of Windows.

“Microsoft has successfully transitioned into an enterprise software company and these results show that, because the strength of server and tools and the actual way they sell licenses to business is making up for the missing PC sales,” said Kim Caughey Forrest, an analyst at Fort Pitt Capital.

Effectively, Microsoft no longer relies on a new PC to make money from software. Only 20 percent of the company’s product revenue comes from computer makers paying license fees to put Windows on their machines. About 45 percent comes from multiyear licensing agreements with customers.

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