IBM shines, Google and Microsoft disappoint market

Stephen Withers
Friday, 18 July 2008 05:19

IT Industry - Listed Tech

Google is sometimes seen as Microsoft's big competitor, but financially it's hardly in the same league - not yet, anyway. Microsoft has reported revenue of $US15.84 billion for the quarter ending 30 June 2008, compared with Google's $US5.37 billion.

And how's boring old IBM going? $US26.8 billion for the quarter - roughly Microsoft plus two Googles.

IBM makes a lot more 'stuff' than the other two companies, so let's look at earnings instead: Microsoft made $US4.28 billion, Google $US1.25 billion, and IBM sits in the middle at $US2.71 billion.

All three firms reported substantial improvements on the year ago quarter. IBM's earnings per share were up 28 percent, Microsoft's by 18 percent, and Google's an impressive 39 percent.

IBM was the only one of the three to exceed analysts' estimates. Consequently, both Google and Microsoft shares dropped more than 6 percent on the news. IBM also fell, but by only 0.6 percent.

Google has been growing at a phenomenal rate since its inception into the league of listed companies so it is inevitable that its earnings growth would slow at some stage. However, the decline below expectations may be a reflection of the ailing US economy and its effect on advertising revenues.

IBM, has gradually shifted its revenue base to services over the years, and is by far the most diversified of the three companies. Perhaps surprisingly, IBM's System z mainframe is one of the fastest growing parts of its business: up 32 percent, compared with overall systems revenue growth of 10 percent. Software revenues have risen by 17 percent, technology services by 15 percent, and business services by 18 percent.

Find out how well Microsoft's online business is travelling on page 2.