Dow Drops on Geopolitical Day, but Morgan Stanley and Google Report Earnings

Good morning, good lookin'... The three things you need to know on July 18th are:

Jul 17, 2014 at 11:00PM
German sausage manufacturers forming a "meat cartel" to jack up prices on your favorite bratwurst is annoying -- but it's not a "geopolitical disaster." The Dow (DJINDICES:^DJI) plummeted 161 points Thursday for its worst loss in three months after the Malaysia Airlines crash, and Israeli invasion of Gaza, stoked worldwide investor fears.
1. Google still figuring out "mobile" challenges
Why Google Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) mixed earnings report when you can so much more easily read about it here? On the bright side, Google's $12.7 billion in quarterly revenue topped Wall Street's expectations, and represents a hefty 22% increase from the same period last year.

But, as users increasingly turn to mobile phones instead of desktop computers for their Internet browsing and shopping, Google hasn't kept up. Google's share of mobile ad spending fell from 50% of the market to 41.5% in the last couple of years, while Facebook's revenues jumped 9% in the space (#watchoutforzuck).

The takeaway is that Google still goes big or goes home -- like its high capital expenditures of $2.65 billion on future growth, building data centers, and God knows what else in its "Google X" labs. Plus, its spring "hiring spree" of 2,200 new employees brings its total up to 52,000 Googlers (who probably just like the company's free lunches).
2. Microsoft fires 18K in its biggest job cut ever
Welcome to Microsoft! (Oh yeah... you're fired.) Shares of your dad's favorite tech firm, Microsoft (NASDAQ:MSFT), jumped 1% Thursday on news from new CEO Satya Nadella that 18,000 people are being laid off. It's time to cut the fat, and that means 12,500 Nokia employees will be suffering through Microsoft's biggest job cut ever.
The power-bald-headed Steve Ballmer, Microsoft's previous CEO, acquired Nokia last September. Those Finnish engineers were a proud people, and many of them have idled as Microsoft's mobile phone biz went nowhere. The rest were axed Thursday in what's a prime example of corporate "synergies" that executives talk about for an acquisition -- eliminating redundant workers.

The takeaway is that the stock rose after the announcement on investor enthusiasm. Unlike the crappy Windows XP that somehow still works in your cubicle, investors were refreshed by this bold change from the new CEO. Layers of Microsoft bureaucracy stink like an onion, hurting profitability -- the new CEO clearly hates onions.

3. Morgan Stanley's earnings lookin' good (again)
Morgan Stanley is famous for being Goldman's No. 2, but the investment bank is starting to stand out with awesome recent performances -- like its $1.9 billion in second-quarter profits, up a whopping 97% from last year. That's partly thanks to an accounting adjustment, but it beat estimates -- and feels darn good to the avid Morgan Stanley MarketSnacks readers.
The most impressive thing is that Morgan Stanley's (NYSE:MS) stock trading revenue topped Goldman's -- $1.8 billion vs. $1.6 billion. Besides investment banking activities, the company's conservative Wealth Management business is becoming more important and more profitable as a reliable revenue source.
The takeaway is that other banks' profits fell in the quarter, but MS's rose like a beautiful financial phoenix. The CEO's plan to decrease reliance on the volatile investment banking and trading business is working, and the stock is up 24% in the past 12 months.

As originally published on

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Jack Kramer has no position in any stocks mentioned. Nick Martell has no position in any stocks mentioned. The Motley Fool recommends Google (C shares). The Motley Fool owns shares of Google (C shares) and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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