If IBM’s figures were disappointing for investors, then those of Google and Microsoft will reassure them and offer some optimism around the IT industry. Google, which was concerned over lower mobile ad prices, appears to have shaken it off and has posted profits of US$ 3.35 billion, up 16% on the last time.
Google’s Ad Clicks
Google’s fortunes over the past quarter were always going to be dependent on how the price of mobile ads behaved and whether there would be enough interest in them to lift Google’s revenues.
In January, we saw that Google, despite reporting US$ 12.1 billion in ad revenues, up 19% on the same quarter in 2011, was concerned about the ongoing decline in the price of mobile ads.
However, that trend appears to have been reversed over Q1 even if the prices are still lower than in previous quarters -- although marketing companies are reporting that those prices are now on their way up.
Leaving aside Motorola, which didn’t really appear on the books until late last year, revenues rose 22% to US$ 12.95 billion from a year earlier and equaled the revenue growth from the fourth quarter. With Motorola, revenue totaled US$ 13.97 billion, up 31% from a year ago.
In figures this translated into a fall in the price that advertisers paid when people clicked on Google ads of 4% as opposed to 6% in the last quarter, and was offset by a 20% rise in the click rate on ads.
Mark Mahaney, an analyst at RBC Capital Markets cited in the Wall Street Journal said of the Google earnings figures:
Investor sentiment is more positive on Google than it's been in at least two years because people are less concerned about mobile [ad prices] being a challenge to Google's economics”.
As for Motorola, Google said it posted a first-quarter operating loss of US$ 271 million, down from a $353 million loss in the fourth quarter and a $527 million loss in the third quarter.
Shares rose quickly last night, once news of the figures were made public, to US$ 765.91, a total rise so far this year of 8%.
Microsoft, too, managed to shake off some of the financial demons despite the fact that, as we have seen before, the PC market appears to be in terminal decline. It also seems that recent releases have paid off, particularly Office and Windows products that have pushed profits 19% higher than the same quarter last year.
One of the notable events around this quarter’s figures -- Q3 for Microsoft -- is that Peter Klein, who has been CFO for the past four years, is leaving the company. Microsoft didn’t say why and his departure is sudden, only indicating that it would announce the name of a new CFO in the near future.
It’s been a good quarter for Microsoft with revenues jumping to US$ 20.49 billion from US$ 17.41 billion a year ago, an increase of 19% on the same period last year.
This resulted in net incomes of US$ 6.06 billion, up from US$5.11 billion or 60 cents a share in the same period a year ago.
The figures should also put a halt -- if not an end -- to recent criticisms of Microsoft over the lackluster reaction to the release of Windows 8, and from a financial perspective, the recent downgrade Microsoft stock by Goldman Sachs.
It is unlikely that the current figures will silence critics entirely as it still has to show that it can make it in the tablet market, demonstrate that Windows 8 can finally take off, and show how Microsoft and its Office division plan to deal with the decline in PC market.
Overall, though, the figures will give it some temporary respite. The entire Windows business rose by 23% to US$ 5.7 billion, even if it didn’t break down those figures to show how Windows 8 was faring, or what the figures for Surface were.
But there was other mobile news too. Klein also announced another prong to Microsoft’s mobile strategy will be the arrival of the small touch-enabled Windows devices in coming months, which many speculate is confirmation that a 7 inch tablet is on the way.
Elsewhere in Microsoft, its server and tools division also did well, rising by 11% to US$ 5.04 billion, while the business division that includes both Office 365 and the new Office 2013 has also done well with growth of 8% to US$ 6.32 billion.