Retail News Update

Google and Microsoft appear to be feeling the pinch, with both technology behemoths falling short of profit expectations amid the continuing economic gloom.

The internet search engine operator admitted economic weakness in the US and Europe was having an impact, while lower-than-expected business sales weighed heavily on the software giant.

Shares in both companies declined sharply after hours in New York, with Google’s equities down as much as 10pc in extended trading while Microsoft’s shares were off by as much as 4pc.

Quarterly results released by the companies last night suggest the technology sector has not been immune from the wider economic woes.

However Google chief executive Eric Schmidt, reporting a second-quarter profit about 2pc below expectations at $1.25bn, said that the company was “very, very well” positioned for an economic slowdown.

Hal Varian, the internet firm’s chief economist, added that “we have a little bit of the Wal-Mart effect going on as times get tough” and cash-strapped consumers began to move online in the hope of finding a bargain.

Google saw a 1pc fall in the number of US users “clicking through” to advertisements on its site in the second quarter compared with the first, and although the figure was 19pc higher than a year ago, that compared with 30pc growth on the same basis in the fourth quarter of last year.

Microsoft’s chief financial officer Chris Liddell said the company was facing a “tough environment”, also labelling the online advertising market as “tough”.

The software company lowered its forecasts for 2009 and reported a fourth-quarter pre-tax profit of $4.3bn, up 41pc, on sales of $15.84bn, up 18pc.

Meanwhile technology services company IBM beat expectations, reporting a second quarter profit up 22pc to $2.77bn as the business strengthens its focus outside the US.