There's little doubt that Google and Microsoft had challenging quarters. Both companies' earnings came in below Wall Street expectations, which prompted a bloody sell off in after-hours trading. Oddly, though, executives at both companies seemed happy with results.
To be fair, it wasn't all gloom and doom -- Google's profit was up 35 percent -- but the company missed expectations by 9 cents per share, which doesn't instill much confidence that the company can escape a recession unscathed.
Wall Street analysts mostly expected a "strong" quarter, but the signs were on the wall pretty early on that Google is feeling the pinch of a downturn. Last quarter the company walked away from a pricey plan to build a hotel and conference center; it closed a couple offices in Dallas and Denver; and there were rumors of a hiring freeze.
Google denied the hiring freeze, but, as it turns out, the company only added 428 employees in the second quarter, a marked slowdown from recent quarters.
Despite the fairly obvious signs of cost cutting, Google CEO Eric Schmidt denied that the economy has had much of an effect on business.
"Google has continued to do well . . . We believe we're very, very well positioned -- especially if [the economy] gets worse, and the reason is because there's a flight to quality," said Schmidt in a conference call this afternoon.
In our mind, Schmidt sounds like a man in denial -- if ad spending gets cut, Google will undoubtedly be affected. It's not so clear cut, though, says Bernstein analyst Jeffrey Lindsay.
"You do find, in tough times, advertisers don't spend on speculative buys -- they stick with what works," Lindsay says.
Similarly, Microsoft put a happy spin on its earnings, which fell a penny per share shy of Wall Street estimates.
"Those are very good numbers for a company of our size, in what many companies are finding challenging conditions," said Microsoft CFO, Chris Liddell, in an interview with the Associated Press.
Investors disagreed -- Microsoft shares got creamed in after-hours trading.
Photo: Flickr/Karen Horton
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