NEW YORK ( TheStreet) -- On the weak reports of Microsoft (MSFT - Get Report) and Google (GOOG - Get Report), 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
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
, 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,
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
-- 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
, 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.