Downturn exposes Google's strengths, Microsoft's flaws

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If it wasn't already clear that Microsoft Corp. had passed the torch of technology leadership to rival Google Inc., Thursday's numbers confirmed it.

Software giant Microsoft announced disappointing earnings and its first-ever across-the-board employee cuts: 1,400 jobs immediately and 3,600 additional positions in the next 18 months. It's shares dropped 11.7 percent Thursday.

On the same day, Google announced quarterly revenues of $5.7 billion, an increase of 18 percent over the same quarter a year ago. Profits fell to $382 million because of a onetime charge, but they were still higher than analysts had expected. Google's share price rose 3.4 percent Thursday.

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Déjà vu

There is delicious irony in all this. Just as a nimble Microsoft bested a much bigger IBM 18 years ago by focusing on its own Windows operating system, Google has passed Microsoft with its web-centric focus.

Although Google is a third the size of Microsoft, it is riding the Internet wave. The software giant remains tied to the personal computer, whose sales are vulnerable in the midst of a severe recession.

Technology waits for no one. But it changes so fast that it often offers redemption.

IBM's revival

After three years of floundering, with job cuts that had been unthinkable a few years earlier, IBM hired Louis Gerstner. A technology neophyte, he proved to be a management genius who refocused the company on network computing, especially e-commerce and services – a strategy that continues today, although it has been refined over the years.

On Tuesday, IBM surprised analysts with strong sales in high-value services and software.

Microsoft still powerful

No one underestimates Microsoft's tough CEO Steve Ballmer. "We will emerge [as] an even stronger industry leader than we are today," he said in a statement Thursday.

With some 90,000 employees, even after the planned staff cuts, and an estimated $27.4 billion in sales for this fiscal year, the company retains the firepower to make big moves. But it will do so as a runner-up, no longer leading the high-technology pack.

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