Downturn exposes Google's strengths, Microsoft's flaws
Software giant Microsoft announced disappointing earnings and its first-ever across-the-board employee cuts: 1,400 jobs immediately and 3,600 additional positions in the next 18 months. It's shares dropped 11.7 percent Thursday.
On the same day, Google announced quarterly revenues of $5.7 billion, an increase of 18 percent over the same quarter a year ago. Profits fell to $382 million because of a onetime charge, but they were still higher than analysts had expected. Google's share price rose 3.4 percent Thursday.
There is delicious irony in all this. Just as a nimble Microsoft bested a much bigger IBM 18 years ago by focusing on its own Windows operating system, Google has passed Microsoft with its web-centric focus.
Although Google is a third the size of Microsoft, it is riding the Internet wave. The software giant remains tied to the personal computer, whose sales are vulnerable in the midst of a severe recession.
Technology waits for no one. But it changes so fast that it often offers redemption.
After three years of floundering, with job cuts that had been unthinkable a few years earlier, IBM hired Louis Gerstner. A technology neophyte, he proved to be a management genius who refocused the company on network computing, especially e-commerce and services – a strategy that continues today, although it has been refined over the years.
On Tuesday, IBM surprised analysts with strong sales in high-value services and software.
Microsoft still powerful
No one underestimates Microsoft's tough CEO Steve Ballmer. "We will emerge [as] an even stronger industry leader than we are today," he said in a statement Thursday.
With some 90,000 employees, even after the planned staff cuts, and an estimated $27.4 billion in sales for this fiscal year, the company retains the firepower to make big moves. But it will do so as a runner-up, no longer leading the high-technology pack.