Wall Street is getting jittery about the booming tech sector.
Google and Microsoft both posted quarterly profit gains Thursday, but they did not meet analyst expectations, and the Street, already nervous about signs the economy is taking its toll on the Internet ad biz, promptly took it out on their stock: Share prices in both companies plunged in after-hours trading.
Both companies, embroiled in an ongoing soap opera with Yahoo, did their best to put a good face on the economy’s impact, but analysts weren’t convinced. With good reason: Microsoft chief financial officer Chris Liddell conceded that hard times had taken a toll on its online division, which primarily makes money from Web ads. The division lost $488 million for fiscal fourth quarter, double the year-ago figure, on a 24% jump in revenue.
“This is the area where we’re seeing direct impact from the economic slowdown,” Liddell said. He called the revenue “still strong, but it wasn’t as strong as we had hoped for.”
The company’s fiscal fourth-quarter revenue rose 18% to nearly $15.8 billion and its profit jumped 42% to $4.3 billion.
Google execs put a braver face on the company’s ability to withstand the downturn, casting its ads as a value proposition akin to Wal-Mart. Topper Eric Schmidt called the earnings “good results,” avoiding effusion, and chief economist Hal Varian conceded that consumers are being cautious in their online spending.
Netco said it earned $1.25 billion in its last quarter, a 35% gain from the year ago period. Revenue rose 39% to $5.37 billion.
Schmidt referred to Google’s Yahoo deal as the signature event of its quarter. Microsoft’s lackluster perf in its online division showed just how much it needs a boost in that area.
The tech titan has recently aligned with investor Carl Icahn in its battle for Yahoo’s search biz. Yahoo, which has spurned several Microsoft advances in the past, but now says it is willing to be acquired outright, fired another salvo against the pairing, calling Microsoft’s actions “stupefying.” The letter from Yahoo chair Roy Bostock and chief exec Jerry Yang slammed Icahn for his lack of knowledge about the Internet biz. It said the latest offer from “the odd couple” serves “only their very narrow interests.”
Meanwhile, as the drama drags on, more execs continue to exit Yahoo. Karin Gilford, Yahoo VP and general manager for entertainment, is leaving to become senior VP of Fancast and online entertainment for Comcast. Jimmy Pitaro, who already oversees Yahoo Sports, gained oversight of her staffers; he reports directly to Scott Moore, who heads Yahoo media.
More jockeying between Yahoo and Microsoft is expected as the Aug. 1 shareholder meeting approaches. Yahoo is skedded to report its latest earnings next week.