Google and Microsoft Report Rise in First Quarter Profits

The two tech giants have reported higher profits for the three months ended in March.

Google and Microsoft have both reported rising profits. Photo: skynetcusco/Flickr

Google Inc has grown net revenue 23 percent in the first quarter of the year to $9.99 billion as its search advertising business continued to show strength.

Shares of the Internet searching leader, which reached an all-time high of $844 in March, has risen on 2 percent to $783.08 in afterhours trading on Thursday.

It’s estimated than average cost-per-click, a critical metric that refers to the price advertisers pay Google, declined 4 percent from a year ago, the sixth consecutive quarter of declines but an improvement over the fourth quarter’s 6 percent slide, reports Reuters.

“Google.com seemed to be doing fine,” said Macquarie analyst Ben Schachter. “Considering some of the scares around Europe, it’s not nearly as bad as it could’ve been.”

Wall Street had already prediced that Google’s growth will decrease and ad rates decline as advertising moves on to smartphones and tablets.

The company’s main Internet business scored $9.99 billion in first-quarter net revenue, icluding fees paid to partner websites, compared to $8.14 billion in the first quarter of 2012.

Meanwhile, Microsoft reported that it made $6bn in profit during the first quater of the year, a jump of more than 17% from a year ago.

The earnings, which exceeded media and marker forecasts, came despite a lukewarm reception for Windows 8 and a decline in global PC sales during the period.

Analysts suppose that Microsoft’s profits were boosted by changing the way its sold its products to corporate clients, as well as cost-cutting measures.

“Microsoft has successfully transitioned into an enterprise software company and these results show that,” said Kim Caughey Forrest, a senior analyst at Fort Pitt Capital.

“The strength of server and tools, and the actual way they sell licences to business, is making up for the missing PC sales. The margins are fantastic and the online services division seems to lose less money each quarter,” she added.

Also on Thursday, IBM reported first quarter earnings of $3bn, down 1% from a year earlier, with revenues falling 5% to $23.41bn – lower than analysts’ expectations.

According to BBC, IBM unveiled that its results of the first quater are not so high because of delays in completing deals, with about $400m worth of contracts that were expected to be counted in the first quarter of the year now being moved into the second.

Moreover, the company admitted that the recent weakening of the yen had affected its earnings. The depreciation of the yen means that it earns fewer dollars from sales in Japan.

“Despite a solid start and good client demand, we did not close a number of software and mainframe transactions that have moved into the second quarter,” said IBM’s chief executive, Ginni Rometty.

“The services business performed as expected with strong profit growth and significant new business in the quarter.”

IBM’s chief financial officer Mark Loughridge said it was “hard to measure” whether the recent series of US budget cuts – the sequester – had affected the firm.

“I can tell you that our US federal business was down 13%, which was certainly a drag on the US performance,” he said.

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