NEW YORK (TheStreet) -- Two of the three computing giants reported earnings last night, and the market reacted well to both reports, as both companies traded up in the after-market.
However, these two companies are by no means doing equally well. Let me explain how Google (GOOG) is sucking the lifeblood out of Microsoft, and it's going to get a lot worse in the coming quarters and years.
Microsoft grew revenue year-over-year by 7% and adjusted EPS by 6%. This compares to Google, which grew revenue (exclusive of Motorola) by 21% and adjusted EPS by 20%. In other words, Google is growing three times as fast as Microsoft.
Microsoft is in the midst of the biggest worldwide computing boom in history, with billions of people around the world starting to afford computers -- whether residing in their hands, laps or on their desks -- for the first time. So why is Microsoft growing so slowly, hardly keeping up with more commoditized old-world businesses?Google, that's why. Ask yourself this question: How many people do you know who have switched from a Google product to a Microsoft product in the last year? Two years? Ever? Exactly, me neither. Let's mention four major product areas where Google is beating Microsoft: 1. Productivity software Microsoft Office is Microsoft's biggest profit center because -- you guessed it -- it typically costs a lot of money to use it. Some versions of the Office suite has cost as much as $450, although many people, including students, of course pay less. Google sells laptops for $450, and the software is provided for free for individuals and small businesses. 2. Email Everyone knows Gmail beats Hotmail. That's why almost all of your friends -- at least those under the age of 50 -- have switched. 3. Smartphones Depending on whose market estimates you use, Android has around 50% market share, whereas Microsoft struggles to achieve 5%. This is the biggest market in the world, and Google is beating Microsoft 10 to 1. 4. Social media In one year, Google has reached 250 million users, or one third of Facebook's. Yes, user engagement isn't quite there yet, but who thought one year ago that Google would even be close to 100 million by now? What does Microsoft have? A stake in Facebook. Better than nothing, but a relative embarrassment compared to Google.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV