Kara Swisher

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Microsoft Q4 Earnings: A Surfeit of Surfaces and the Post-PC Era = Trouble

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Microsoft had a bad fourth quarter, mostly because many people are not using PCs any more. In addition, the tech giant took a $900 million charge related to having to cut the price of its Surface RT tablet, which had — as you might imagine — an impact on results.

Missed profit expectations, missed revenue, missed all over the ying-yang.

Now, a conference call to explain it all to you by new Microsoft CFO Amy Hood. She has just gotten the job and now has to put a good face on a bad situation, as well as to give more details of the software giant’s recent restructuring of its business.

2:31 pm: I simply do not envy the job of Hood, who has just been handed the ugly task of explaining Microsoft’s weak earnings in the fourth quarter.

Essentially, despite longtime protests to the contrary, Microsoft has finally got to admit that the PC era is over, after years of trying not to and employing ever more pretzel-icious euphemisms to include PC in the mix.

“In many ways,” said Hood about the quarterly results, “it reflects the trends.”

Then, miracle of miracles, she actually talked about a PC market decline in an honest way, which the software giant has been loath to do over these many years of, you know, the decline.

Hood could not put any shine on this fact and did not try to.

Windows was declining, she said, and it was time for Microsoft to “evolve beyond the PC” into the “modern era of computing.”

It’s an “incremental process,” said Hood, meaning it’s hard to turn a lumbering battleship around so quickly, even though this torpedo has been headed toward it for quite a while now.

But, she said, “we know we have to do better,” noting that is why the company recently did its massive restructuring to morph into “One Microsoft.”

TIME-10

Today, it felt more like “Done Microsoft,” at least in some of its flagship arenas that once allowed it to absolutely dominate the tech landscape. No longer.

That said, results in its enterprise business were a whole lot better. For example, here’s a bright spot in the glum results: Microsoft’s subscription Office 365 business is now on a $1.5 billion annual run rate.

2:37 pm: Investor relations dude Chris Suh then read off the press release deets. You can read it all here, but companies love to repeat it anyway out loud.

Thus, I shall not go into it, as I am enjoying a tasty donut instead.

2:48 pm: Hood returned, talking about the future and zeroing in on those management and organizational changes that CEO Steve Ballmer announced last week.

She also finally admitted that Microsoft, as AllThingsD has previously reported, was considering changing how it reports its financial results.

“What changes, if any, that will be made to our reporting structure,” said Hood, would be announced later in September at an analysts meeting.

Hood called the current era a “pivotal time” for Microsoft.

change concept

Oh, dear — the dreaded “pivot,” which I have officially defined as tech’s pretty word for running for the exits of the current business in order to glom onto a new one before the jig is up.

“We believe we will able to execute more effectively and more efficiently,” she said.

One can hope!

One also has to wonder why Microsoft did not video broadcast this quarter’s results, as Yahoo CEO Marissa Mayer did earlier this week for its Q2 earnings.

She also had some very weak results to communicate, including an actual decline in revenue, but her flashy performance in doing it made it seem as though decline meant increase. It does not in any way whatsoever, no matter how it is spun, but Mayer might be developing a reality distortion field approaching that of the late Steve Jobs of Apple.

I wonder if Ballmer could do the same. Hmm, moving on!

2:54 pm: It was then time for Q&A from Wall Street analysts.

One of the first was about the short-term revenue impact of the move to the cloud. Hey dude, it’s going to be big, in case you have not heard!

Hood got a lot of questions about the transition and was trying her best to make it seem as though the company has this one handled.

She was very good at this, sounding both refreshingly honest about the situation and also with enough of a cheerleading tone that it was credible enough.

But, in reality, she was really not saying much, because — given the massive changes rocking Microsoft — there will not be much to say until this all plays out.

“I feel quite good,” said Hood, who is smart not to say she feels great.

Hood did use the new Microsoft moniker for itself as a “device and services” company quite a bit. So much so, it could almost be a drinking game.

3:06 pm: A question about Windows, which had a tough quarter.

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Hood told analysts that the new mix — PC, smartphones and tablet — will impact the results. Shocking, I know.

Overall, all the analysts’ questions were a little in the weeds, given the larger implications for Microsoft in this report and coming on the heels of the organizational changes.

For example, Hood mentioned lower expenses at one point and she gave a non-answer when asked about it later. It would seem that could mean layoffs at Microsoft, for example, but no one asked that obvious question.

But that was Hood’s job here — which she did as well as could be expected, given the material she had to work with — to make the proverbial silk purse out of a sow’s ear.

Well, not a silk purse today for Microsoft, clearly, but not a sow’s ear, either.


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There was a worry before I started this that I was going to burn every bridge I had. But I realize now that there are some bridges that are worth burning.

— Valleywag editor Sam Biddle