Why Google is a better stock than Microsoft

SAN FRANCISCO (MarketWatch) � In case any tech investors are debating whether shares of Microsoft Corp., with a price-to-earnings ratio of 10, are a better value than those of Google Inc., with a P/E of 22.5, some numbers released this week are a reminder why they�re not, unless you�re an income investor that likes a dividend.

The latest data from research firm comScore Inc. show that the U.S. market for Internet search grew at an annual rate of almost 11% in December. That means Google�s core market is still growing at a double-digit rate in the middle of a tepid economic recovery. Google controls 66% of that business.

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At the same time, global shipments of PCs fell at an annual rate of 1% last month, according to a report from market-research firm Gartner Inc. A separate report by International Data Corp. said the drop was 0.2%. You�ll recall that Microsoft�s primary market is selling software for personal computers.

This is not to say that Google has done a better job than Microsoft of either running its business or investing its capital. On the contrary: Google has pretty much flubbed both in the past five years.

Poor returns on investment

Google has spent billions on acquisitions that seem to be more tactical than strategic � as was the case with Motorola Mobility Holdings Inc. , which is going to add significant employee expenses yet seems to be mostly a defensive patent play. In the case of YouTube, Google is still, five years after the deal, trying to find ways to justify not only the $1.65 billion purchase price, but also why it spends millions more every year hosting the world�s largest collection of amateur videos, given that YouTube isn�t profitable.

In the meantime, Facebook Inc. has surpassed Google as the world�s most-visited Web site.

In spite of all this, Google still gets more than 90% of its revenue from search.

Similarly, Microsoft has spent the better part of a decade trying to challenge Google in the search business, a quixotic quest that has yielded only 15% of the market � a measly share compared with Google�s.

/quotes/zigman/93888/quotes/nls/goog GOOG 642.23, +1.69, +0.26% /quotes/zigman/20493/quotes/nls/msft MSFT 30.33, +0.07, +0.23%

Microsoft just passed Yahoo Inc. YHOO �for second place, which is an achievement. But the celebration should be muted, give that the feat merely required the same level of skill as avoiding a slowly falling target, which is what Yahoo�s search market share has been.

At the same time, Microsoft�s huge push into gaming has provided it with a well-name brand, the Xbox, but no profits, even as Apple developed a mobile-computing and communication platform that is upending the PC world.

With Android and iOS, who needs UM?

Back around the turn of the century, I can remember when Microsoft (and Cisco Systems Inc. and Hewlett-Packard Co. and many other companies focused on enterprise sales) talked about the importance of unified messaging, or UM, to the future of their business. Well, that future is here, and employees using smartphones, laptops and tablets are bringing unified messaging into the enterprise from the bottom up.

Microsoft�s efforts are now focused on a partnership with Nokia Corp. NOK , even though the tech industry is littered with failed examples of former rivals trying to cooperate.

After all its efforts, Microsoft�s revenue and profits are still overwhelmingly provided by PC and server software, just as they were a decade ago.

But unlike Google�s cash cow, which grazes in expanding pastures, Microsoft�s Windows and Office franchises operate in tired fields. If you�re looking for growth, resist any urge to buy Microsoft.