Transcripts

"Tech Talk"-What's Next for Google & Microsoft?

SUSIE GHARIB: Now that Microsoft and Google have issued their quarterly reports, the big question is, what is next for the two tech giants? As New York bureau chief Scott Gurvey reports in a special edition of "Tech Talk," both firms have some explaining to do.

SCOTT GURVEY, NBR CORRESPONDENT: For Microsoft, earnings are usually not a problem. The cash cows called Windows and Office throw out a remarkable amount of profit. But stock performance is another issue. Shares peaked almost a decade ago and have lost more than half their value since. That is because of concerns the company is not keeping up with technological change, especially the Internet, and the mobile computing and communication devices -- a world where everyone is connected all the time. Microsoft holds its annual financial analysts meeting next week, and the analysts I've talked to have two big questions for CEO Steve Ballmer. First, what's with Yahoo? The melodramatic attempt to buy or partner with the Internet portal has been dragging on all year. Analysts want to know what does Microsoft need that Yahoo! can supply, and what is plan B? Question two, what's next for Windows? Windows Vista, the latest version of Microsoft's ubiquitous operating system, has received mixed reviews. Vista was supposed to be more secure and more reliable than its predecessor, but in working toward those goals, Vista became unable to run some older programs and work with some older devices. That upset some customers. In the wake of all this, Apple has gained a little market share. "P.C." magazine editor Lance Ulanoff says Microsoft must address all of these issues.

LANCE ULANOFF, EDITOR IN CHIEF, PC MAGAZINE: They understand what users really want, but they're a very big company with very entrenched bureaucracies. So it really remains to be seen whether or not they can pull this off. And at the same time, they're trying to find more success on the desktop. They really have to come up with a winning online strategy. That hasn't happened, and people are wondering if the only way they can win or at least that they believe they can win is by acquiring Yahoo!.

GURVEY: It's a different story for shares of that other tech giant, Google. While they are off substantially from their highs, they still trade at more than six times their original offering price. The company dominates the business of Internet search, which means selling advertising targeted to match search terms. It has been trying to diversify into such areas as banner ads, but remains pretty much a fantastically successful one-trick pony. So analysts have questions for Google too. What can you do besides search? And how far will you go to stop Microsoft from buying Yahoo? When Google went public, its founders said they were not going to spend a lot of time answering questions from investors and analysts, and they've pretty much kept to their word. So it might be some time before we get any answers from them. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.