When can their glory fade?
O the wild charge they made!
All the world wonder'd.
Honour the charge they made!
Honour the Light Brigade,
Noble six hundred!
The Charge of the Light Brigade by Lord Alfred Tennyson

This morning, all eyes were on Google (GOOG) and International Business Machines (IBM), after both companies posted financial results that came up short of expectations.  What is interesting is that these are giant behemoths, and today's action will be inconsequential in the long run, probably in the short run, too. What both companies have in common is a race to stay relevant in a space that is changing as rapidly as the shapes found inside a kaleidoscope.

Big Blue knows the pitfalls of resting on its laurels too long as it has dealt with shifts of fortune and has even had a near-death experience.

On the other hand, Google's management are smart guys that know history, and they seem determined not to repeat the mistakes of their former tech stalwarts, who have lost their place in the grand pecking order.

To that end, the management at Google just pulled off a stock split that has effectively given them total control to do wild and crazy things, which shareholders might otherwise find objectionable (One would assume that the board of directors would be looking out for the general interest of shareholders, too, but I think this is a rubber stamp group). Part of this approach is admirable, as it has always been about the future and staying ahead of the pack. On that note, this means taking risks and spending time and money with a greater uncertainty of outcome.

In many ways, business is like war, which means there has to be preparation and attack, and victory and defeat. On October 25, 1854, at the Battle of Balaclava, during the Crimean War UK, Commander Lord Cardigan issued an order that was communicated incorrectly, resulting in a charge of 600 young soldiers, into the teeth of well-armed and positioned Russian soldiers.

The story was prose six-weeks later in a poem that has gone on to become a classic of valor and of bravery.

Lives were lost, but fortunes can be lost as well when companies move too late, or too soon. Google's own misguided charge was its purchase of Motorola's smart phone business for $12.0 billion, only to sell it for $2.9 billion, a couple of years later (The company retains certain patents, but there is no doubt that this was a multi-billion dollar disaster). Not to be deterred, Google has only upped the ante on its quest to beat the competition, today and tomorrow:

 Vanity & Public Relations Deals:

•  Shweeb (human-powered monorail)
•  23 & Me (biotech)
•  Affordable Housing credits

Deals with Practical and Public Relations Implications:

•  $75 million windmill this year (15 deals, a total worth more than $1.0 billion)
•  Fiber Optic Network in Kansas City

 Google Capital:

•  $40 million in Renaissance Learning
•  Survey Monkey
•  Lending Club (P2P lending platform)

 Google Ventures:

•  $1.2 billion to invest in 2013; 75 investments, while exiting 9 others
•  $258 million in Uber

Google's Big Deals:

•  Nest
•  Wireless gadgets
•  Hotel Booking Software
•  Glass
•  Titan (drones)
•  Data Center

The Rub?

Google has a dilemma that was underscored in last night's results.  Its core business is suffering. Total revenue before TAC cost, was up 19% to $15.42 billion, but expenses rose 23% during the quarter.  Moreover, sites, network, and other segments all higher year-over-year, were down quarter-to-quarter. Mobile is killing the company. Actually, the revenue loss on mobile phones, where smaller screens offered fewer options and a greater pricing decrease, was offset partially by a 29% increase in tablet revenue.

I would not write off Google and its current problems. On the contrary, the company is positioned to know more things about each person on the planet, than their respective governments. I guess there are a lot of ways to monetize all their tentacles, including one day using extortion, or intimidation. Of course, these guys would not do any harm to humanity, unless you are a shareholder looking for an equal vote in the business.

Today, all shareholders might feel a little pinch.  Moreover, it is probably a very small bump in the road, although it is also a very loud reminder of the need to stay ahead of the competition, and even changing battlefields

Today's Session

Equity futures have been crawling out of a deep hole all morning after a strong two-day bounce that give up ground on last night's earnings news. This morning's earnings have been decidedly better.

Earnings Beats Include:

GS beat $0.57
BX beat $0.55
BLK beat $0.32
MS beat $0.08
AXP beat $0.03
HON beat $0.02

Even the big miss from Chipotle Mexican Grill (CMG) is overshadowed by strong guidance sending underlying share price higher.

The Other Tech Miracle

Baker Hughes (BHI) posted financial results that beat consensus on the top and bottom lines. The key continues to be the fracking miracle that boosted North America revenue even as numerous wells were shutdown from tough winter conditions. The company's geographic revenue during the quarter: North America $2.78 billion +9%, Middle East and Asia $1.11 billion or +24% and Latin America $530 million a decline of 10%.

US Well Count

Eagle Ford -61 or 5%
Marcellus -52 or 9%
Barnett -47 or 13%
Williston -30 or 4%
Permian +23 or 1%

Not a day goes by when I don't hear something negative about new drilling technologies from people or organizations that don't create jobs and have no clue how to improve an economy that benefits all citizens.

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