Google’s financial performance faltered in the second quarter as a downturn in the internet search leader’s advertisement prices deepened.

The results announced today show that Google is still having trouble navigating a technological transition driving more online activity on to smartphones and tablets. Those devices pose a challenge because their smaller screen sizes fetch lower ad rates than on personal computers.

Google’s stock fell more than 5 per cent in extended trading.

Google’s average advert rate fell by 6 per cent from the same time last year during the three months ending in June. It marks the seventh consecutive quarter of falling ad prices.

Google earned $3.2 billion, up 16 per cent from $2.8 billion a year earlier. Revenue rose 19 per cent to $14.1 billion.

Meanwhile Microsoft Corp today reported lower-than-expected quarterly earnings as slow personal computer sales ate into its Windows business and it took an unexpected $900 million charge for its inventory of unsold Surface tablets.

The world’s largest software company reported fiscal fourth-quarter profit of 59 cents per share, compared with a 6 cents per share loss in the year-ago quarter when it wrote off the cost of a failed acquisition.

Wall Street had expected earnings of 75 cents per share, on average, according to Thomson Reuters I/B/E/S.

Revenue rose 10 per cent to $19.9 billion, helped by sales of Microsoft’s Office suite of applications, but fell short of analysts’ average estimate of $20.7 billion.

Microsoft said the $900 million charge related to its Surface RT tablet, which was launched alongside Windows 8 in October but has not sold well. Earlier this week,

Microsoft said it was drastically cutting prices and expanding distribution of the model to entice buyers.

AP/Reuters