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By Jason Stipp and Jeremy Glaser | 10-19-2012 10:00 AM

Tech Takeaways From a Rocky Week

Morningstar markets editor Jeremy Glaser digs into Microsoft's weak quarter, Google's unwelcome surprises, and brick-and-mortar retailers' continuing battle against their cyber rivals.

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to The Friday Five.

This week, earnings were dominated by tech giants with several notable takeaways for investors. Here to offer the details is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for joining me.

Jeremy Glaser: Jason, glad to be here.

Stipp: So, what do you have for the Friday Five this week?

Glaser: We're going to talk about Microsoft, price-matching, Go-ops-le, Verizon and finally, we'll talk about someone who might have a little bit more time on their hands to play with their technology.

Stipp: Microsoft this week released earnings, and it was a weak quarter. Some folks are saying, well Windows 8 is coming out, so a lot of people were waiting to buy products until that release. Is that the whole story, though?

Glaser: Microsoft had a weak quarter, and like you said, it was expected to be a week quarter. This wasn't a big surprise, given that they have this product cycle that's just getting ready to get started, but I think the slowdown in PC sales is more than just the fact that there is new operating system coming out.

Consumers are really shifting away from buying new laptops, buying new desktops, and into mobile devices. They are going out and getting that iPad or that other Android tablet. They are going out and just using their smartphone, and they feel like they just don't need to upgrade as quickly. Corporate budgets remain relatively tight. People aren't out buying huge numbers of new PCs.

I think Microsoft is really banking on Windows 8 driving people to the store, but it's not clear that that's exactly going to work out. If you remember Windows Vista was supposed to do something similar, but consumers kind of took a look at the new operating system, decided it wasn't that much more exciting than Windows XP, businesses as well, and decided not to make that big switch.

Windows 7--the successor to Vista--has been extremely successful. People really enjoy using it. Given that Windows 8 has a big user interface change that will take a fair amount of learning curve to get people up and running, it could be sometime before we see huge adoption rates of it.

I think Microsoft sees that PC sales are slowing. They are trying to combat that by coming out with things like their Surface tablet, which we got pricing on this week. They are really trying to sell it as a premium product. We'll see if they are able to make inroads in that space. But certainly slowing PC sales is going to be a problem, or certainly a headwind, for Microsoft for a while just as it was in Intel's results as well.

Stipp: One area of the market where tech has had an impact is the retail sector, brick-and-mortar stores trying to compete with Internet retailers. We got some news this week from Target. It's the latest join some other companies trying to combat the Internet threat. What's your takeaway on that strategy?

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