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Google, tech sector hit by sluggish economy

Sharon Gaudin | Oct. 19, 2012
Google today reported a drop in profit and revenue for the third quarter, an unexpected slip that highlighted its struggle to make money on a growing mobile market.

Much will depend on the role Motorola plays in Google's mobile strategy, especially when it comes to search.

"I think this is not something you fix in a quarter," said Milanesi. "It's such a change in the market with the role that search has. Google is soul searching how they're going to monetize in this next phase. How will consumers search? How do they go about serving that need? There's a big opportunity there."

The sluggish global economy also weighs on Google's efforts to correct this financial slip.

"Google isn't in big trouble, but there are limits to growth and limits to the market power that any single company can wield," said Olds. "Plus, we're also still in a serious worldwide recession. Google has managed to grow steadily throughout the recession, but perhaps we're finally seeing lower global economic activity have an effect on the Google juggernaut?"

Patrick Moorhead, an analyst with Moor Insights & Strategy, noted that Google certainly isn't alone. The economy is starting to drag on a lot of tech companies.

"High tech is in a financial funk, on the whole, as evidenced by the downturn in nearly all sectors of the market," he added. "Google can't do anything about the economy, but they can optimize their business around a downturn. They will need to pull back on their operating expenses, which could mean layoffs or less advertising themselves. Google is one of the last companies to reduce R&D spending, so they will need to go after operating expense."



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