Making Sense of the Numbers

Google, IBM, and Microsoft beat revenue projections. These are good signs that the biggest tech companies are not experiencing a slowdown in their businesses.

However, there's one minor detail: Microsoft and Google both missed on earnings. Investors in after-hours trading have duly punished these stocks. But are the losses entirely warranted? I think the Google and Microsoft misses need some further analysis, but investors should rest assured that the two companies both beat revenue projections in a very tough economic environment.

Take Google's position, for example. Google is eating up market share and is getting closer and closer to a natural monopoly. Also, ad dollars are continually shifting from traditional media to the online space, whether on the desktop or a mobile device. Once overall ad spending picks back up, Google stands to reap all of the benefits. (Google's mediocre performance may have graver implications for Yahoo! than it does for Google itself.)

Besides, Google has typically performed poorly in Q2, which would point more to poor analyst estimates than it would a real trend in Google's long-term trajectory.

Anyway, the online ad market isn't going away. In fact, it will see huge expansion globally in the next 12-18 months when the global economy turns around. (History shows that business cycles are indeed cyclical, and there's no reason to believe that the economy won't turn around in the next year or so.) Google is still the best play in this space. You still need Google in your portfolio. It might not be for the faint of heart, but then again: what business do the faint of heart have trading such a volatile stock anyway? Don't trade it. Buy it, hold onto it, and watch it go up in the next couple years.