Liveblogging the Microsoft Fourth-Quarter Earnings Call: Look Out Below!
How low can Microsoft go?
Very low, it seems, in announcing really bad fourth-quarter earnings, missing Wall Street revenue estimates by an astonishing $1 billion.
Talk about a game of extreme limbo.
After the market close Thursday, the Redmond, Wash.-based tech giant reported that fiscal fourth-quarter net income fell to $3.05 billion, or 34 cents a share, from $4.3 billion, or 46 cents a share, in the same period a year earlier.
Revenue for the period ended in June fell 17 percent to $13.1 billion. Wall Street had been looking for earnings of 36 cents a share on $14.37 billion in revenue, according to data compiled by Thomson Reuters.
Online advertising revenue took a big hit, decreasing $86 million or 14 percent, to $529 million, as the display advertising business got hard hit.
No surprise–Microsoft (MSFT) shares have been taking a beating in after-hours trading.
BoomTown liveblogged the earnings call.
2:32 pm PDT: The conference was kicked off and Microsoft CFO Chris Liddell–whose jaunty New Zealand accent I never tire of–came on right away, pointing out the very obvious bad news in several different ways, although also trying to find some kind of silver lining.
The quarter, he said, “marks the end of one of the most difficult [periods], but also most encouraging.”
The darkness has a dawn, he noted: “In my mind, we are a stronger company than we were a year ago…but we need to lift our game to a new level in 2010.”
You can say that again!
So Liddell did, saying that “there are some signs that we have at least seen the worst” of the econalypse, and “looking forward, we do not expect trading conditions to get worse.”
Well, how could they?
2:35 pm PDT: Microsoft’s investor relations guy went over the numbers. Crappy results, but meaningful cost savings.
Read the official press release here.
2:48 pm PDT: Liddell came back on and he said this would be one of the most “interesting” years, especially due to a spate of new product rollouts coming, such as Windows 7.
He did some forward-looking, talking about a variety of arenas at Microsoft, from the games business to its product launches to tax rates.
Microsoft has, despite the economic turmoil, a great balance sheet in terms of cash–with over $30 billion.
I think I found a gold lining.
2:56 pm PDT: Question-and-answer time.
The first was about spending on personal computers, which hit Microsoft badly on the downside, said Liddell.
But, as a refresh cycle kicks in, he noted that average selling prices will go up.
It would eventually get “better,” which Liddell pronounced, bitter.
The next question was about margins. Microsoft has tried to cut costs, said Liddell, although it would never completely offset the bad economic conditions. And he was not making promises.
A follow-up on buying back more Microsoft stock. Nope, because “we’re still not sure we’re out of the woods.”
The next question was about what customers are saying about the Windows 7 upgrade and about server shipments.
No surprise, but server shipments are weak. “We don’t see a lot of pent-up demand in that area,” said Liddell.
As to PCs and Windows 7, he said he has more hopes of people being more likely to start to move over. Or, at least, prepare to do so.
“Then, you start to get into a much more virtuous cycle,” said Liddell.
A question on whether expenses can be slowed more.
Sorry, analysts! Nope.
Another question on looking at PC-refreshing. We’ll see, said Liddell.
Another expense question. Hey, analysts, you might want to stop asking since Liddell is not going to suddenly say Microsoft is lopping off more employees–at least, not right now!
Plus, there are those pricey upcoming product launches, said Liddell, which is going to take some dollars.
“There are a series of relatively small items, which add up,” he said.
3:09 pm PDT: An annuity question. Zzzzzzzzz.
Analysts continued to try to get Liddell to predict when things were going to take off again and return to the golden times when Microsoft was a regular financial powerhouse.
It was admirable that he refused to take the bait and maintained his tone of semi-doom and lessening-gloom.
“I would not promise that it is going to be significantly better,” said Liddell.
3:18 pm PDT: A question about the latest launch of Office in 2010 and its impact on financials.
Liddell said he did not see a significant impact until 2011.
The next question was also one on revenue: “Is revenue going to grow?” asked one analyst in a kind of desperate-sounding way.
Liddell said Microsoft would be watching costs, which would help. As to revenue, which is less controllable, he could not say.
3:22 pm PDT: Although there have been no queries about Microsoft’s discussions with Yahoo (YHOO) about a search and online advertising partnership–which will cost the company a pretty penny, if struck–there was a question about Google (GOOG) and its Chrome operating system.
“We still believe that people will want a client and an Internet-based experience,” said Liddell.
Translation: Google is a mouse that roared!
The final question was about how various geographies are doing. Asia and emerging markets are a place for growth, said Liddell, followed by North America, especially relative to Europe and Japan.
But, the tone of the earnings call? Economically speaking, it’s still a small world after all.