Earning Season: Winners and Losers

So we're officially at the earning season Yesterday Google, SanDisk, our friends up north Microsoft, next week Apple is going to report in a highly expected quarter with new macs and the first quarter with the iPhone.

So yesterday Google (GOOG) failed to meet the street's expectations with earnings of $925.1 million, or $2.93 a share, compared with earnings of $721.1 million, or $2.33 a share, for the same period last year.

Earnings excluding the cost of stock options came in at $1.12 billion, or $3.56 a share. Analysts surveyed by Thomson Financial had forecast earnings of $3.59 a share. Total revenue rose to $3.87 billion from $2.46 billion. Revenue excluding traffic acquisition costs was $2.72 billion, and analysts were looking for revenue of $2.68 billion.

Eric Shmidt Google's Chief Executive actually had no appologis for investors he simply said they overspent on luring quality people in the period—though they will keep closer tabs on staff spending in the future. "The kind of people that we brought in are so good that we are happy we did this. Come on Eric...
The number of full-time Google employees jumped by 1,548, to 13,786 at the end of June. Which may explain why why operating expenses, other than the cost of revenue, jumped 85%, to $1.21 billion in the period. That's why profit rose only 28%, to $925.1 million, which fell short of some analysts' estimates.
Google's shares dropped more than 7% in late-trading losing nearly 40$ a share.




Next up is Microsoft (MSFT), which reported that its fiscal fourth-quarter profit rose only slightly compared to the same period a year earlier, due to a previously announced $1.1 billion charge resulting from its Xbox video game business.

Microsoft chief financial officer Chris Liddell said during a conference call that the quarterly results, including higher-than-anticipated revenue, were due largely to products such as the recently released Office suite of software applications and Vista operating system.

The Redmond, Wash.-based software giant said net income for the period ended June 30 came in at $3.04 billion, or 31 cents a share, compared with $2.83 billion, or 28 cents a share, in the period a year earlier. Revenue rose to $13.37 billion from $11.8 billion.

Excluding items such as the Xbox charge, Microsoft said earnings were 39 cents a share. Analysts polled by Thomson Financial had expected earnings excluding items of 39 cents a share on revenue of $13.27 billion.

Microsoft previously announced the planned financial impact of the Xbox technical flaw earlier this month. They said it will reimburse customers who have had the flaw repaired, and it expanded warranty coverage for the flaw from one year to three.
I think the results were overall pretty impressive for a mature company that makes most of its money in a slow-growing end of the tech business, the software giant continues to grow at a respectable pace, but after closing regular session trading Thursday at $31.51, Microsoft shares fell more than 2% in after hours trading to $30.85.

Also reported yesterday SanDisk (SNDK) , which is actually an interesting story by itself, SanDisk dominates the flash memory market and is actually the No.2 music player maker after Apple.
But for the past few quarters they've disappointed investors, this time around however they said it earned $28 million, or 12 cents a share, compared to last year's $96 million, or 47 cents a share. Revenue rose 15% to $827 million from $719 million a year ago.

By that measure, SanDisk topped the estimates of analysts surveyed by Thomson Financial, who forecast a profit of 16 cents a share on $794 million in revenue. So SanDisk profit actually fell, but they're seeing stable pricing seen ahead.

SanDisk said its earnings were hurt by ongoing declines in the average selling prices of NAND flash memory chips. However, on a conference call to discuss the results, Chief Executive Eli Hariri said that now that the second half of the year has started, "prices are firming up and there are market signs that the pendulum may have begun to swing back in our direction."

The drop in earning was actually expexted because of the ongoing price cuts in the NAND flash memory market so Hariri's comments about the outlook for improvements in pricing was seen as upbeat by investors, who sent SanDisk's shares up almost $3 a share, or 5%, to $58.85 in after-hours trading.

I really like SanDisk, I think they're in a highly competitive market and they need to work on there margins but i'm convinced that for the long run its a great stock to hold, so is Google, but their stock price is just crazy: 540$ a share!