Google And Microsoft Report Soaring Revenues

Tech firms Google and Microsoft have reported strong quarterly growth amid shifting strategies for both.

Google's core internet business net revenue grew 23% in the first quarter as profit climbed to $3.35bn (£2.2bn), despite a trend toward cheaper ads on smartphones and tablets.

"We had a very strong start to 2013, with $14bn (£9.1bn) in revenue, up 31% year-on-year," Google chief executive Larry Page said.

Shares of Google, which reached an all-time high of $844 (£550) in March, were up 1.5% to $777.75 (£505) in after hours trading on Thursday.

Microsoft was revenue rise in the quarter by 18%, year-on-year

Meanwhile, Microsoft's strategy of selling more long-term software contracts to big business customers cushioned the blow from plummeting PC demand and also lacklustre demand for Windows 8.

Net income was $6.1bn (£4bn) for the fiscal third quarter, which ended in March, up 18% from $5.1bn (£3.3bn) the same period last year. Revenue was $20.5bn (£13.3bn), up 18% year-on-year.

The boost comes as personal computer sales fell 14% in the first three months of the year, just as Microsoft tried to ramp up sales of the latest iteration of Windows.

But the company's ability to keep hold of big customers rescued its third-quarter results.

"Microsoft has successfully transitioned into an enterprise software company and these results show that," Fort Pitt Capital analyst Kim Caughey Forrest said.

"Because the strength of server and tools and the actual way they sell licences to business is making up for the missing PC sales."

In effect, Microsoft no longer relies on a new PC to make money from software - only 20% of the company's product revenue comes from computer makers paying fees to put Windows on their machines.

Models pose with the Galaxy Nexus, the first smartphone to feature Android 4.0 Ice Cream Sandwich

Google's Android operating system is used on Samsung smartphones

About 45% comes from multiyear agreements with customers - generally big companies - paying millions for three-year access to Windows and Office software.

The software giant is also working with manufacturers to produce a line of small touch-screen devices powered by Windows, apparently intended to compete with tablets like the iPad Mini and Amazon Kindle Fire.

Google has also stepped up its strategic shift, to mobile advertising spurred by its Android operating system leaping past Apple iPhone and iOS software to power some 70% of devices.

Google improved its cost-per-click (CPC), a critical metric that refers to the price advertisers pay the search giant, in the first quarter.

The CPC rate declined 4% year-on-year in the first quarter, following a 6% decline in the fourth quarter.

"It's classic Google. There's plenty of things to like and some things not to like," BGC Partners analyst Colin Gillis said.

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