Google and Microsoft have both failed to meet profit expectations amid the economic downturn, it has been reported.

The internet giant acknowledged it had been affected by wider conditions in the US and Europe, while Microsoft's sales had been lower than forecast, according to the Daily Telegraph website.

However, Google chief executive Eric Schmidt believes his company is in a very strong position to withstand a slowdown, the news provider said.

It added Microsoft's chief financial officer Chris Liddell acknowledged his company is facing a "tough environment".

Microsoft has been making attempts to acquire internet firm Yahoo! in recent months, attracting comment from the Google chief executive.

It was recently reported that Eric Schmidt felt Microsoft's original bid for Yahoo! was anti-competitive from the outset.

He apparently stated there are greater levels of competition in the markets such as internet search and advertising in which Yahoo! is a leader.

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