When tech stalls, flat earnings count as a win

Less-than-stellar results from Microsoft and Google make Apple look good by comparison as the industry’s slump continues

The tech industry's doldrums drag on, with earnings wilting like the East Coast under a heat wave. After Google's and Microsoft's disappointing results last week, Apple's announcement of flat earnings this week could almost be seen as a big win.

Microsoft especially missed big in its fourth-quarter earnings. As The Seattle Times noted, the company was "hit especially hard on the sales side by the slumping PC market and on the profit side by a write-down in the inventory of Surface RT tablets."

InfoWorld's Woody Leonhard wrote that the earnings report "begs the question of what Microsoft will do next, as PC sales inexorably fall into the abyss -- first for consumers, then for companies." His take? Look for more financial sleight of hand from Microsoft, including updated Windows 8 sales numbers showing a healthy increase in the number of licenses sold, and organizational changes designed to make things look rosy -- from an accounting point of view at least.

Google also failed to meet expectations, as its search business continued to slow and the cost of paid clicks fell 6 percent compared to the same period last year. As Sam Grobart of Bloomberg Businessweek writes, "Google is part of an elite club of otherwise-wildy successful companies (Facebook,Yahoo, Twitter) with highly capable, well-educated employees who can't seem to get a handle on mobile advertising for love or money." Grobart continues:

Google gives away its operating system, Android, for free, because the company wants as many people using the Internet as possible. The more people online, the more searches. The more searches, the more revenue for Google. But if the rates for those searches continue to fall, how long can that strategy last?

Meanwhile, some analysts are grousing that prices at Apple aren't falling fast enough. While the company's earnings remained flat versus a year ago, sales of iPods, iPads, and Macs all declined. An analyst with Technology Business Research says that in order "to keep selling large numbers of iPads, keep the competition at bay and protect its ecosystem, Apple has to recognize that the gravy train days of outrageous margins are over."

InfoWorld's Bill Snyder has a different take on Apple's higher prices and margins, which he says tell you two things: "It produces very efficiently, and buyers are willing to pay more for its products."

And while growth at Apple may be slowing, as InfoWorld's Galen Gruman writes, "It tells you something that Apple's performance, as modest as it was, is considered to be good compared to its traditional competitors." Also in Apple's favor: The company traditionally introduces new products in the fall, with recent speculation centering on a new iPad mini tablet and possible iWatch.

There are also signs the economic slowdown is spreading, as China's manufacturing activity in July contracted at its quickest pace since last summer. As the New York Times noted, "This could also be bad news for the rest of the world, which had been hoping that booming expansion in Asia could inject some much-needed oxygen into a global economy that is weighed down by anemic growth in the West."

So it's a safe bet that the doldrums dragging down tech will linger a while longer.

This story, "When tech stalls, flat earnings count as a win," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.

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