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Do You Buy the Dip on Old Tech Here? No.

Stocks in this article: GOOG MSFT YHOO YELP HPQ DELL IBM FB Z

NEW YORK ( TheStreet) -- On the weak reports of Microsoft (MSFT) and Google (GOOG), a lot of people are wondering if they should buy the dip on old tech here.

I wouldn't -- but for different reasons for both companies.

I think it's interesting that Microsoft and Google were both down 5% late Thursday initially on the reports but Friday on the open things are a lot worse than that for Microsoft -- recently down 9% at $32.23-- while things are better for Google, down 3% at $883.

Although both companies "missed" last night, it was a much more worrying miss for Microsoft.

There have been concerns out there about Windows 8 since October, before its release. However, initial re-orders for licenses seemed to distract investors for the first few months. In last night's report, we heard that new CFO, Amy Hood, is expecting "mid-teens" declines in Windows revenue this year.

Many had been thinking that Microsoft could go whistling past the graveyard while the rest of the PC market continued to burn. Yet, what's good for Dell (DELL) and HP (HPQ) is apparently also good for Microsoft.

There was also the $900 million writedown of Surface inventory, lowering prices on the units to levels that Microsoft says it's confident it can move product but which is barely above its cost of assembling.

The good news for Microsoft is that it continues to have done a great job at developing its cloud offering up and running and being very good. In past quarters, cloud has helped Microsoft look strong in comparison to folks like IBM (IBM), which really is nowhere. The bad news in this particular quarter is that Microsoft might have lost some revenue, even though it didn't necessarily lose customers as some of the shifted over more of their business to cloud.

The business division is expected to grow mid single digits this year. Their online services division will grow by low double digits but likely still lose money. Xbox and the entertainment division will grow by single digits.

Put it together and it's a picture of a company in flux. There's great cash flow there and a nice dividend. There's also a new reorganization and a large activist investor pushing for change.

Is it so bad? No. Is it so good to make me want to buy? No.

As far as Google goes, how many quarters now has it been that we've obsessed over the Cost Per Click (CPC)? Maybe going on two years? Back two years ago, it was the fear of the shift to mobile that kept Google's stock in the high $400s. Now, you have to pay up to $900 for the same stock.

Google -- throughout the last two years -- has protested that CPC is just one of many metrics investors should look at. It has also tried to assure us that a drop of CPCs is more than made up for by increases it has seen in Paid Clicks.

Paid clicks, the company has tried to argue, represent demand for their search services. So, things may get jostled around as the world moves over from desktop PCs to mobile, but folks are still clicking blue lines and display ads, so Google keeps collecting tolls on the information superhighway.

Google is right. It continues to have the premium product out there that people will continue to use ahead of Bing, Yahoo! (YHOO) or anyone else.

I think it's this realization that has people treating Google's stock much more benignly than they are Microsoft's.

But do you buy the dip? It's really up to what kind of return you want to get out of Google.

It's a heck of a company. Smart people as far as the eye can see at the Googleplex. But you're buying it after a big double over the last two years. And you're getting a fabulously profitable search business that's sort of treading water with CPCs going down and paid clicks going up.

The biggest concern I have about Google here is the budget that advertisers have already carved out for Google and how that might increase over the next few years. Most advertisers see Google as a necessity for their business -- but not at dramatically higher levels of what they're paying now.

For sure there are likely several tweaks that Google can continue to make to increase the profitability of the clicks they're currently getting. However, I'd rather invest in some other companies that might get an increased budget commitment from advertisers in the next few years to experiment in some areas -- like Yahoo! and Facebook (FB) -- than Google.

Again, it all comes down to what return you want.

Rather than buy the dip on old tech, I'd rather spend time on where the puck is going in tech and look at some smaller companies -- such as Yelp (YELP) or Zillow (Z), albeit that are already coming off big runs in the stock prices -- and plunk my money there rather than on these bigger names.

At the time of publication the author was long YHOO.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007.

Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University.

He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson.

You can contact Eric by emailing him at eric.jackson@thestreet.com.

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