Google, Microsoft take a hit on Wall Street

After both reported solid quarterly earnings that fell slightly short of Wall Street expectations, Google shares dropped 7% in after-hours trading and Microsoft slipped 6%.

"In better, more favorable times, investors might be prepared to give [companies] the benefit of the doubt," Sanford C. Bernstein analyst Jeffrey Lindsay said. "But in this market, any sign of any weakness or bad news at all is seized upon, and no prisoners are taken."

Both companies performed better abroad than in their home country. Most of Google's revenue came from online ads outside the United States, which helped push second-quarter sales up 39% and profit up 35%.

The Mountain View, Calif., company reported earnings of $1.25 billion, or $3.92 a share, on revenue of $5.37 billion. Excluding stock-based compensation costs, profit was $4.63 a share, but analysts had expected $4.74.

"Investors had begun to warm up to Google as a safe haven in the current storm," said Anthony Valencia, media and entertainment analyst with Los Angeles-based TCW Group. "But today's results, while very solid, were a wake-up call that no company is immune from a consumer slowdown."

Microsoft's fiscal fourth-quarter profit rose 42% to $4.3 billion, or 46 cents a share, just missing the 47-cent target set by analysts. Sales gained 18% to $15.8 billion.

The Redmond, Wash., company trimmed its forecast for the new fiscal year, saying annual profit might be as little as $2.12 a share, down from the $2.13 it projected three months ago.

"Clearly, people are getting concerned about the length of softness in the U.S.," said Chief Financial Officer Chris Liddell. Noting "difficult economic conditions," Liddell said U.S. sales rose by 15%, much less than in the developing world.

Liddell said he was disappointed that Microsoft's stock wasn't reflecting its strong profit performance. The stock is now trading at less than 15 times the per-share earnings of the last 12 months, less than half the price-to-earnings ratio of a year and a half ago.

Sensitive tech investors bid down other companies.

ValueClick Inc.'s stock lost a fifth of its worth, dropping $2.76 to $11.01, after the Westlake Village-based Internet advertising network lowered its earnings guidance for the next fiscal year by about 11%. It cited a weaker economy and poor trends in display ads.