The two companies with the best chance to knock Apple Inc. out of the top spot in the mobile industry report earnings Thursday, and the stakes for both are unusually high.
Both Google Inc. and Microsoft Corp. will report quarterly earnings after markets close on Thursday. Not only are both companies among the biggest players in the tech industry, but both are also undergoing significant changes in strategy that could have implications well beyond the areas where they operate.
Here are three things to watch for when the numbers land on Thursday afternoon.
Both Google and Microsoft have made huge bets on mobile being the future of computing – and so far, with differing results. Google’s Android operating system software now powers more smartphones worldwide than any other operating system, including Apple’s iOS, which powers all iPhones. That’s in large part because Google essentially lets any manufacturer use the software for little to no cost. But even though Google beats its rival in terms of sales, Apple still generates more profit from its phones than any other company. In addition, Apple’s iPad still owns the lion’s share of the tablet market.
Microsoft, on the other hand, is showing up a bit later to the mobile game. At the end of this month, the company will unveil the newest version of its Windows operating system, which has been designed to function best on mobile devices. In addition, Microsoft is also partnering up with Nokia to build Windows-based, high-end phones in a bid to fill the void left by Research In Motion’s shrinking market share.
Investors already have a clear sense of what each company’s mobile strategy is. On Thursday, they’ll want to know whether each company is getting closer to generating meaningful revenue from the mobile market.
Neither Google or Microsoft are well-known for producing hardware (with the exception of the popular Xbox gaming system). But in recent months, both companies have focused much more on building devices in-house. Google expanded on its strategy of co-building smartphones with outside players by designing its own media server hardware, called the Nexus Q. That’s in addition to a Google branded phone and tablet.
Microsoft has also jumped into the tablet market with the recently released Surface tablet. The Surface is designed to showcase the abilities of the new Windows operating system, and offer a high-end competitor to the dominant iPad.
But for both companies, the move into hardware is not without risk. Traditionally, Microsoft and Google have built software for their hardware manufacturer partners. But by building the hardware themselves, they risk alienating key allies. It’s still early going, but both companies would do well to give investors some sense of whether those new products are gaining any traction in the marketplace so far.
3: The Wider Impact
The two tech giants are usually seen as proxies for the wider economic condition, in part because their business fortunes tend to fluctuate with global spending. Google’s advertising revenue, which still makes up the bulk of its business, it closely tied to the wider economy, and Microsoft still makes a lot of its money off desktop software sales, which also fluctuate with the economy. Even investors who don’t own stock in either company will want to pay attention on Thursday afternoon, as particularly weak numbers from both could signal that the global recession is far from over, and advertisers and businesses aren’t quite ready to start spending again.