On the surface, Google had a better growth rate than Microsoft in the first quarter. Google’s revenue rose 31% to $14 billion. But Motorola contributed more than $1 billion of this, against nothing last year. With Motorola backed out, Google’s revenue rose less than 23%. Microsoft’s revenue was higher by 18% to $20.5 billion.
Steve Ballmer, Microsoft’s CEO, has started to make good on his promise that a diversified company is better than one based on legacy products — although Microsoft’s Windows, Servers and Tools, and Business Divisions are wildly profitable. The legacy Windows Division posted revenue of $5.7 billion, a 23% increase from the prior year period, because of the launch of Windows 8. The growth rate of this division likely will not be sustained as sales of Windows 8 tapers off. Microsoft’s relatively new Entertainment and Devices Division posted revenue of $2.53 billion, an increase of 56% from the prior year period.
Google continues to suffer from a lack of diversification. Search from Google’s own site and affiliates make up almost all the corporation’s revenue when Motorola is backed out. Google’s successful Android OS business has not produced any revenue, despite its remarkable capture of market share. Google eventually will have to do what Microsoft has done — diversify — to create growth. The Motorola deal is an early part of that process.
When its results are put side-by-side with Google’s, Microsoft is hardly a faltering company.
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