Instant View: Google's core Web biz strong; Microsoft succumbs to first loss
07/20/2012| 01:33am US/Eastern
Microsoft Corp reported its first quarterly loss as a public company, after swallowing a $6.2 billion charge for writing down a struggling online business unit.
And Google Inc -- unveiling results for the first time since buying Motorola Mobility -- said a strong core Internet business lifted quarterly revenue by more than a fifth, as increasing user engagement on Web search ads offset falling rates.
Also on Thursday, Advanced Micro Devices forecast revenue below expectations as it struggles with tepid PC sales and pressure from rival Intel Corp.
COLIN SEBASTIAN, ANALYST, ROBERT W. BAIRD & CO
"We are seeing an ongoing trend of clicks moving to mobile devices. And we are seeing the expected results of that: a further decline in pricing, but an increase in volume. It kind of netted out, revenues are a little light."
CLAYTON MORAN, SENIOR ANALYST, BENCHMARK CO
"Cost-per-click was even worse than some expected, and that includes foreign currency impacts, which isn't that surprising. We've had several quarters now of declining CPC and I don't think that's alarming to anyone at this point.
"But it would be nice to see that number begin to move toward more positive territory."
KERRY RICE, SENIOR ANALYST, NEEDHAM & CO
"It was a pretty solid report. We were seeing, across the tech world, sentiment getting a little too negative.
"Search demand in the U.S. was pretty solid, and despite economic challenges in Europe, I'm getting the sense that search demand was not too bad there. There's a little bit of squishiness in the margins, with higher TAC (traffic acquisition cost) as a proportion of revenues.
"Paid clicks was phenomenal, mostly driven by mobile. CPC (cost-per-clicks) was down more than I expected, but this could be a trough, since we did see a sequential uptick in CPC.
"We may have hit the bottom here and are returning to a little bit more flat CPCs."
SAMEET SINHA, ANALYST, B. RILEY & CO
Paid-click "volume gross is accelerating because mobile volume continues to explode. Cost-per-click continues to come down because mobile cost-per-click is lower than for desktop.
Google core revenues were slightly ahead of our expectations.
HERMAN LEUNG, ANALYST, SUSQUEHANNA FINANCIAL
"Cost-per-click is sequentially up 1 percent. That's a good sign that you are getting to a recovery.
"Paid-click volume is really strong; it's a good thing. The volumes are accelerating and usage of Google has not stopped, it just has continued."
BRENDAN BARNICLE, ANALYST, PACIFIC CREST SECURITIES
"It looks good, given the dicey economic environment and the weakness we already know about in PCs. There's about $18.5 billion in unearned revenue, which are contracts that customers have signed but that the company can't recognize right away. Most of this will be recognized over the next 12 months. So we've got close to $18.5 billion of next year's roughly $80 billion in revenue already on the books.
"The Microsoft Business Division, which includes Office, was better than expected this quarter. The Entertainment and Devices group and the online group also exceeded expectations.
Windows and Server and Tools were weaker than expected. I'm interested to see whether the $15 cost to upgrade to Windows 8 has delayed some PC sales."
MARK MOERDLER, SENIOR ANALYST, SANFORD C. BERNSTEIN
"There were two parts that were expected but may or may not have been modeled in. The write-down on the online division and the deferral due to Windows 8. I am not sure how much has been modeled in.
"Apart from that it was a good quarter. PC sales could have been much worse. Usually people hold off buying new PCs when there is a new software coming out.
"Margins were quite good in servers and tools and the business division.
"You need to drill more into the details but on a top level, looking at servers and tools which are generated by tech spending, it looks good."
TRIP CHOWDHRY, ANALYST, GLOBAL EQUITIES RESEARCH
"Considering the macro backdrop, these numbers are very very good. The consumer is not spending, businesses are not spending either. The U.S. is struggling, Europe is a mess and Asia is slowing down, and Microsoft stood stable.
"It seems like Ballmer is getting his hands around the company for the first time. If he continues to execute, there's more positives to come. The product pipeline is strong and they have enhanced their distribution channel.
"There's a lot of anticipation for the next Microsoft products. They are regaining credibility with enterprises."
BETSY VAN HEES, ANALYST, WEDBUSH
"One thing that was disappointing is that the server business was down, and that's an area that they have been making great strides in so that was disappointing and that's something we'll be looking for.
"Given the pretty significant miss for Q2, we were looking for revenue to be flat to up 6 percent. Guidance was quite disappointing clearly: to be guiding down after such a very difficult quarter, and after their largest competitor had given relatively good guidance in a tough market.
"You have to question if it's market share losses that the company is suffering. Granted, we understand that macro is very weak, but is it also share loss as well?
"It's a combination of definitely macro being challenging, Intel's strong positioning in the market, and consumers' gravitation towards the emerging tablet market."
ALEX GAUNA, ANALYST, JMP SECURITIES
"I don't think there's any reason to have any confidence in their guidance, as weak as it is.
"It's below seasonal but I have to believe there's very low visibility in this environment right now. I continue to believe this is a story that's structurally disadvantaged relative to the greater momentum behind ARM-based computing, and the greater ability to invest and innovate of Intel."
(Reporting by Jennifer Saba and Nicola Leske in New York and Malathi Nayak, Alistair Barr and Gerry Shih in San Francisco)