IBM shows Google Who’s Boss

After the market closed yesterday IBM (IBM) showed Google (GOOG) who’s boss when they both reported 2011 fourth quarter earnings. 

Both Missed Revenue Estimates

Both companies missed revenue estimates (IBM by a little, Google by a lot) but Big Blue beat the street, a feat Google couldn’t do. IBM’s revenue was $29.5 billion, just shy of the $29.7 billion estimate. Google on the other hand came in with $8.1 billion in revenue last quarter, 4% less than the $8.4 billion estimate.

Google was hurt by lower revenue per-click, which was partly because of mobile ads. Mobile ads are cheaper than regular ones, so there’s less profit in this growing area.

Once Again, GOOG Lets Investors Down

But the big deal is Google once again let down investors just as it established trust once again. In November 2010 I said you can’t depend Google. But just last month re-purchased GOOG for clients, as it regained my trust. And what-do-ya-know as soon as I did the stock let me down again.

The problem with GOOG is management doesn’t give analyst earnings guidance. So the analysts looked at the solid quarter in 2011 Q3 and figured on a solid quarter for 2011 Q4. Last quarer was good, just not great, as profits rose 17%.

IBM’s Got it Down

Meanwhile IBM’s profits rose 15% — less than Google’s. The difference was IBM beat street estimates by 9 cents. GOOG missed by 99 cents.

The difference is management. IBM tries to keep investors happy, Google management focuses on growing the business and not helping Wall Street with earnings guidance. Google often has great quarters then poor quarters, IBM works to keep steady and consistent.

Bottom Line

I still like both IBM and GOOG. I own GOOG in my managed portfolios. But right now I feel IBM is the better short-term investment. People will have to get over the Google miss, and that won’t happen until it reports again next quarter. Both stocks have P/E’s of 13, but Google is the faster growing company — GOOG looks like the better stock in the long-term.