Earnings Preview: Google, Microsoft On Tap To Report Record, Opposite Results

It's the tale of two technology cities: Thursday should see two of the sector's giants, Microsoft (Nasdaq: MSFT), the world's biggest software company, and Google (Nasdaq: GOOG), the No. 1 search engine, report record quarterly results.

For Microsoft, though, it will be a record fourth-quarter loss, as the Redmond, Wash.-based developer has announced it will take a one-time charge of $6.2 billion to write off its 2007 acquisition of aQuantive, an online advertising agency.

Microsoft paid $6.3 billion for it, so it's been a disaster. The charge will be to its online services division, which also houses Bing, the No. 2 search engine that competes with Google.

Alternatively, Google could post record second-quarter earnings despite blistering competition from Apple (Nasdaq: AAPL), the world's most valuable technology company, and the charges associated with its $12.5 billion acquisition of Motorola Mobility Holdings, which closed in the period ended June 30.

Analysts surveyed by Reuters generally expect Google, of Mountain View, Calif., to report net income rose about 17 percent to $3.34 billion, or $10.05 a share, from $2.85 billion, or $8.74 a share, a year ago. Revenue is expected to climb more than 20 percent to $8.41 billion.

Among bellwethers in Google's report will be how many new members Google + has attracted in its first year to compete against Facebook (Nasdaq: FB), the No. 1 social networking site. Last quarter, Google said it was 190 million, compared with Facebook's 901 million.

As well, the company may announce a roadmap for the old Motorola division, such as whether Google will sell smartphones under its brand or continue to license the Android OS to others, including Amazon.com Inc. (Nasdaq: AMZN), the No. 1 e-retailer, which is said to be eyeing the market.

Market researchers at Gartner Group (NYSE: IT) estimate Google now accounts for nearly two-thirds of all search activity, ahead of Bing and Yahoo (Nasdaq: YHOO), the No. 3 search engine. Because of it, antitrust regulators in Washington, D.C., and Brussels are known to be probing its market share, possibly for prosecution.

Another wrinkle: whether or not CEO Larry Page, 39, will participate in the investor call to discuss results with CFO Patrick Pichette. Page has suffered from throat problems for several months and has not answered questions if it's more severe than laryngitis.

Chairman Eric Schmidt, 57, the prior CEO, could substitute for Page in the call.

Google also may indicate when its stock split may occur. The two-for-one deal that creates a third class that preserves control by Schmidt, Page and co-founder Sergey Brin, 38, was approved at the June annual meeting. A shareholder lawsuit delayed the effective date at least until October.

For Microsoft, all hands are waiting for the official launch of Windows 8 as well as new products headed by Office 2013, the Surface tablet and other products. Intel (Nasdaq: INTC), the No. 1 chipmaker, already said it expects a substantial ramp-up in the fourth quarter as Windows 8 PCs come out with its latest-generation products.

For Microsoft, analysts surveyed by Reuters expect the company to report net income to fall nearly 12 percent to $5.23 billion, or 62 cents a share, from $5.87 billion, or 69 cents a year ago.

Revenue for the software giant is expected to rise 4 percent to $18.1 billion. Full-year net income is estimated to be $2.67 a share on revenue of $73.78 billion.

Looking ahead, investors may wonder what CEO Steve Ballmer and CFO Peter Klein say about shipments of Windows 8 systems for all platforms. Perhaps another customer besides Finland's Nokia (NYSE: NOK) will adopt it for a smartphone or tablet. The new product has touchscreen capability akin to the iPad's iOS.

Analysts expect Windows 8 sales to skyrocket. Earnings for the next two quarters are expected to be $17.60 billion and $19.7 billion, respectively, with net income in the company's second quarter, ending Dec. 31, as much as $7.59 billion, or 90 cents a share.

Investors have bid up Microsoft shares by 17 percent this year. They closed Wednesday at $30.45, valuing the company at $255.8 billion.

For Google, estimates are also for higher profit, although not as dramatic as the gains for Microsoft. Google shares have fallen 10 percent this year, closing Wednesday at $580.76, valuing the company at $189.3 billion.