Google's disappointing $5 billion earnings


Google stock fell more than $40 a share Thursday in after-hours trading, down almost eight percent. Same for Microsoft, down about six percent after an equally disappointing earnings report.

Google is attracting more users and generating more revenue, but when its CEO spoke Thursday on a webcast, he acknowledged these are challenging times.

"Traffic and revenue have held up well despite uncertain economic conditions as everybody knows," says Google CEO Eric Schmidt.

"Uncertain economic conditions" have been hard on tech and Internet stocks in recent weeks. Google is down over $200 from its high of $747 last November.

"This is a very skittish stock market, and any little disappointment or signs of mortality in such a high-flying company like Google is going to be amplified a little bit by the nervousness in the market," says Golden Gate University Business School Dean Terry Connelly.

Google's highly targeted advertising tied to its users' searches has been highly effective, pulling away revenue from other media.

"Even as the economy may struggle and advertising sales go down, they'll still capture a bigger chunk of it because they are the digital model that everything is transferring to," says Barrons columnist Mark veverkas.

Two other tech companies have seen their stock shares sliding, too. Intel had good news on Tuesday with quarterly earnings up 25 percent, but consumers are gravitating to less costly computers. Its stock Thursday was $6 lower than it was last December.

Microsoft also reported strong earnings Thursday, up 42 percent compared to a year ago. However, its stock is down about $10 from where it was last November.

Even in an economic downturn, Google's chief economist, U.C. Berkeley's Hal Varian, was optimistic on the company's earnings webcast.

"Price sensitive consumers are going to shop more carefully and try to make every dollar count, and that means they're going to be doing research online and they're going to be shopping online," says Google Chief Economist Hal Varian.

However, no one is saying Google is bullet-proof.

MORE: Track the stock market's biggest gainers and losers in our CEO Wealthmeter.

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