AllThingsD’s Ina Fried and I are being held hostage by nefarious Microsoft PR chieftain Frank Shaw in a soul-sapping ballroom in Anaheim, Calif. — within spitting distance of Disneyland’s “It’s a Small World” ride.

The agony — especially since we are about to be entertained by a series of Microsoft execs, including CEO Steve Ballmer, at its annual Financial Analyst Meeting. Yes, it is that kind of day, which included the delightful middle seat on a Southwest Airlines flight.

Here we go:

1:11 pm: There may be forward-looking statements. Well, I should hope so.

1:12 pm: Investor relations dude Bill Koefoed is reading from letters from folks about the Windows 8 look-see, which is also going on here.

It would be touching, except it is not. But I like Bill, who probably has a thankless job, so we’ll let him knock himself out!

1:17 pm: Okay, Bill, let’s move on, although making the execs tiles a la Windows Phone is a nice touch.

1:18 pm: But, no, we go over the financial results from FY11. Double-digit revenue growth, margin expansion, tons of cash, consumers love Xbox and Kinect!

So why does the stock remain so flat? It’s a mystery wrapped in an enigma, wrapped in shareholders who don’t want to give Ballmer much of a break.

Actually, it’s because Wall Street is spanking Microsoft for its slowness in the smartphone and tablet space, that Google is offering Office for free and that Windows is taking a back seat to the browser. Also that cloud thing.

1:21 pm: Most of the slides, including the agenda, have been designed to look like Metro-style “live tiles.”

Note to Redmond: While the interface scales nicely from the phone to the tablet, you may be taking it a bit far.

1:23 pm: First up, COO Kevin Turner, whose speech is call “Operating Momentum.”

He comes out like a football coach and tries to make us all greet him back. I don’t want to go all Larry David here, but one of the unwritten rules of society is that you don’t make anyone under 12 years old or not in a cult do the crowd echo thing.

But, bygones! Turner talks about the strong businesses of Microsoft, especially its Business Division, which is 32 percent of FY11 revenue. The money-losing Online unit is a paltry four percent.

1:30 pm: Turner makes some comparison related to spending, like “drunken sailors.” Say what?

Moving on …

Now for some more football-coachy stuff like “Leveraging & Accelerating Our Strengths!”

Which would be Windows, for the most part.

Next bromide: “Our Cloud Leadership is a Strength!”

Says Turner: Microsoft is “all in!”

Actually, technically, it would be “all up!”

(I am channeling Larry David today. Very innnnnteresssting. Very innnnnnteresting.)

Back to Turner, who promises a “cloud that’s right for every customer.”

1:39 pm: Microsoft really does like the Metro look. It’s freaking everywhere.

1:42 pm: Now: “Embracing the Consumerization of IT!”

There are four pillars of that, including Windows 8.

And now a bit about the growth of the costly Bing and winning in the cloud against Google.

“With Office 365, ladies and gentlemen, we now have a product” to compete, notes Turner, rather gallantly.

Also, Microsoft is smacking back VMware in virtualization.

Go team!

1:46 pm: As an aside, should the consumerization of IT really have four pillars?

1:47 pm: Time for CFO Peter Klein, whose tile reads “Our Opportunity.”

Klein looks like an accountant, which is not an insult, with a reassuring, by-the-numbers tone. It is almost lulling, as Klein’s voice often is on the quarterly calls — which always end up putting my assistant Ed immediately into the nap zone, since I listen to the calls on a speaker phone in the office.

Klein begins by pointing out that the markets in which Microsoft compete will double by 2015, including in gaming and online advertising.

It begs the question: Will Microsoft get a big slug of that?

1:53 pm: Klein goes over the various markets to underscore Microsoft will.

The first up is phone, where the company is trying to break through with Windows Phone. It’s been late, but is a pretty good offering that could become stronger with its hook-up with Nokia.

Next: The big dog of Office. It’s still big, Google or no.

Then: Business Infrastructure — private clouds, public clouds, big clouds and small clouds.

Online advertising is next, which is a weak spot for Microsoft and where it continues to lose money. Which is why Klein spends 33 seconds on it, before moving to the gaming slide.

In that arena, Microsoft does shine, with Xbox and Kinect as very innovative offerings.

1:59 pm: Latest slide from Peter Klein talks about a “balanced approach to capital allocation” with three tiles below it — “invest for growth,” “return cash to shareholders” and “balance sheet a strategic asset.”

If the live tiles in the slide were indeed buttons on a smartphone, I think many in the crowd would be pushing the middle option.

2:01 pm: Peter Klein notes the company’s Triple-A bond rating. Take that, Uncle Sam!

2:02 pm: Klein hands things over to search and online services head Qi Lu.

2:03 pm: Lu, the head of Microsoft’s online unit, is one of the uber-geeks at the company and has perhaps its hardest task.

That would be competing with Google.

While the division loses boatloads of money annually in the effort, Bing has also been a very impressive offering and has been slowly gaining share.

Winning in the space is indeed, as Qi is saying, key to its future.

He brings up the Yahoo online advertising and search partnership, which has been a bit rocky for both parties.

“We had some struggles, because the undertaking is very complex,” said Qi, noting that things have gotten better. “I have confidence we will be able to unlock the economic opportunities.”

Let’s hope so, for the Online unit’s sake.

2:12 pm: Lu says that the company said that the company now has the needed horsepower to compete. But it still needs something new. “To win in search we must break through, break through from where we are,” he said. “We cannot try to out-Google Google.”

2:17 pm: We’re posting some of the key slides from Microsoft’s analyst meeting in this companion post.

2:20 pm: I’ll admit, I checked out a bit here, in which Qi outlines the basics of what Microsoft is trying to do to develop intelligence in online search.

I have heard this speech before from him and it’s a good conceptual model. Investors, of course, only care about financial results.

The message is about “solving deep human needs and delivering compelling experiences,” says Qi.

Disconnect: Wall Street only wants revenue and profits.

2:24 pm: Still, it is nice that Qi dreams so Bing, oops, big.

Next up, Servers & Tools head Satya Nadella, who used to work for Qi.

Nadella is a smoothie speaker and he quickly launches into his spiel about a strong but lesser known part of Microsoft with $17 billion in revenue.

2:35 pm: Nadella is talking about Microsoft’s SQL Server, one of those not-so-sexy big money parts of Redmond’s business. Among those using it are Visa, which built its micropayments using SQL. The next version of the database, btw, is code-named Denali.

On to Office 365 — the cloud-based version of Office. One business signs up every 25 seconds, Nadella says.

2:38 pm: Now he’s updating on Windows Azure, Microsoft’s OS in the cloud. It’s built with enterprises in mind, he says, pointing to some recent customer wins.

Budget carrier Easyjet, for example, has an internal app for their airport workers that runs on connected devices that then talk to Azure.

2:41 pm: The strategy is a mix of public and private clouds.

“In conclusion, our cloud strategy is to cloud optimize every business,” Nadella says, before giving way to Steve Ballmer.

2:46 pm: It’s either the longest or shortest FAM, jokes a golf-shirt-wearing Ballmer.

His tile: “Our Point of View.”

Ballmer has been here for the Windows 8 event and notes how well it seems to be going so far.

“We are seeing some positive reaction,” he says, posting some of the compliments from places like the “Twitter feeds.”

2:49 pm: Ballmer has an unusual way of speaking I always forget about, even though I have heard him talk eleventy-hundred times.

It is an up-and-down, sing-song style, in which he punches the heck out of some words.

Like: “World VIEW” and “Windows is AT the center.”

Which is Ballmer’s first point, because Windows is still Microsoft’s mainstay.

2:52 pm: He runs through the key themes — besides Windows — and they include: New hardware; natural interface, cloud, enterprise and consumer; and “1st party” applications, which means Office and such.

“These form some of the core elements,” says Ballmer, trying to knit it all together and make it not seem that Microsoft is the giant, confusing behemoth that many think it has become.

Ballmer is talking about getting the slowness of “mojo” in the business applications arena, but it could be said about its Windows Phone mobile strategies.

Which is next: “We haven’t sold quite as many,” said Ballmer, but notes “enthusiasm” for the platform.

2:57 pm: “I am not saying I love where we are, but I am very optimistic about where we can be,” he says. “We just have to kick this thing to the next level.”

Actually, about 12 levels. But who’s counting? (The Larry David of tech, that’s who!)

2:58 pm: Ballmer starts the every-word-LOUD about Office.

Why not? It is a huge business for Microsoft after all these years.

Ballmer calls Office “the biggest quiet opportunity.” I will admit it: I like it when a loud dude talks about quiet.

Now an Office demo of Lync, Microsoft’s unified communications offering.

3:07 pm: It is a cool demo, especially the translation part.

The Skype acquisition gets a mention too, with Ballmer noting in a modified Tony the Tiger: “It’s greeeeat.”

We’ll wait and see if Skype head Tony the Bates will deliver.

It’s soon onto Xbox and Kinect, which is decidedly great for Microsoft.

Ballmer notes there will be a lot more video and television offerings on Microsoft.

There is a demo that has some glitches, which is impressive anyway. Obviously, Microsoft is hoping Xbox becomes the home entertainment hub and discovery service (via Bing).

3:20 pm: Live TV is also a big deal, apparently, which is coming to the Xbox.

Finally, Ballmer sums it up, noting things are changing fast.

He says he gets it that investors worry if the company gets it.

“I am very optimistic about our future,” Ballmer concludes, punching NO words.

3:24 pm: It is now on to Q&A, which will also include Windows head Steven Sinofsky.

Goody, goody.

3:25 pm: First question is on whether Microsoft is bringing Office to the new-look Windows. That’s a big one.

Ballmer doesn’t firmly commit, but notes that Microsoft wants to support its platforms with applications.

“We are rethinking and working hard on what it would mean to do Office Metro-style,” Ballmer says.

3:27 pm: Second question on which apps will work on ARM-based Windows, another key question.

Sinofsky reiterates that Windows 7 machines will be able to run all apps in Windows 8 (but of course all Windows 7 machines are Intel or AMD-based, not ARM). Apps written for x86 won’t run on ARM, but all new-style apps will work on both.

Sinofsky notes that if all older apps were allowed to be ported to Windows-on-ARM, the ARM-based systems would lose some of their advantages when it comes to things like battery life.

3:30 pm: Next question is on the opportunity for Windows Phone in the enterprise, noting that most of the recent work on Windows Phone has been on the consumer side.

“The most important thing is to capture the imaginations of people,” he says, noting that they have both work and personal lives.

He notes Mango release has some improvements for businesses.

3:32 pm: Asked if the tablet market will enter the enterprise like the phone, Ballmer notes that consumers will buy lots of different devices and there is always the question of which machines the enterprises will allow in. Some tablets will come in that way, he said.

“We embrace that concept,” Ballmer says.

Sinofsky notes that the proposition of having a tablet that can turn into a serious work computer just by adding a keyboard will have significant appeal.

As for touch, he reiterates his contention that once people use a touch-based Windows 8 machine, they will soon start touching every PC they use.

3:38 pm: Analyst asking in a roundabout way whether Microsoft expects to do better than the 10 percent annual revenue rate it has had over the last five years.

CFO Peter Klein is not biting: “Our view is the opportunity is tremendous. It’s as great as it ever has been.” But market also competitive and fast-changing.

3:46 pm: Finally, a question about Yahoo and the firing of CEO Carol Bartz and all the other uncertainty there.

While Ballmer did the online search and ad partnership deal with her, this hot potato gets handed over to Qi Lu. Thanks, Steve!

The contract survives change of control, he says. “That does not really impact day to day,” says Qi about the Bartz ouster.

Then Ballmer decides to weigh in: “Hundreds of millions of people every day using those services. … No matter where they take their business …”

In other words: He has no idea!

3:49 pm: Next! What about bottom-line growth dropping over the next few quarters?

Klein said Microsoft is focused on the long term and it was not making a guidance statement.

Ballmer: “We’ll give you no guidance. None.”

Anyway, all the markets are growing! Did we not stress that?

3:52 pm: Well, what about a new pricing strategy?

No dice!

The Microsoft execs look a little weary and in need of some cocktail fare. Wait, that’s me.

More on upgrade from Windows 7 and how all these many devices from many companies will work fine together.

Ballmer notes that Bing and Skype will continue to support Google Android and Apple iOS.

It is a small world after all!

3:58 pm: Last question!

One on Office 365 and how it is doing.

COO Turner is back as the coach of Team Microsoft: Great, just great.

Microsoft had a solid fourth quarter, which is why the conference call with Wall Street analysts should be relatively short and sweet.

Or sweet, at least.

Microsoft reported beat expectations on profits that rose 30 percent, as well as on revenue. Of particular note were its Office, Entertainment and Devices and Servers and Tools units. Even the revenue at its perpetually money-sucking Online Services division was up 17 percent.

(You can see Microsoft’s charts and other data here, if you really want more.)

Here’s a liveblog of the call:

2:31 pm PT: Well, Microsoft investor relations dude-in-chief Bill Koefoed sounds unusually jaunty in his greeting.

And why not? The results are good for Microsoft, even a little giddy, with a lot of impressive numbers and solid launches of several products, from Xbox Kinect to Office 365 to Bing, the very pricey but pretty search service.

Next up is CFO Peter Klein, who also sounds like this particular call is a relief.

He talks about the results a bit, most of which are up.

“In summary, we are pleased,” says Klein about the quarter and the year. He also notes that he is “excited.”

It’s party time in Redmond!

2:38 pm: Peppy Bill is back, going through the numbers. Solid!

Klein then moves onto the future and he remains “excited.”

Now, it is onto Q&A from the analysts.

This is where I zone out a little and start to wonder if a doughnut is a wise choice for an afternoon tasty treat.

That would make me “excited.”

Lots of congrats, which only makes me hungrier. One analyst asks why it was so much stronger than expected.

Klein: The economy has improved, businesses are expanding, peeps love them some cloud.

There is a question about how the troubled Yahoo search partnership is going. Klein promises some improvement by the end of the year.

Still, bummer!

But it is quickly back to happy, with a question about the strength of Xbox and its subscribers.

“It’s fantastic,” says Klein.

Like I said, sweeeeeeet.

You’d think there would be a party in Redmond, Wash., today, as software giant Microsoft soundly beat Wall Street expectations in its third-quarter earnings released earlier today.

Microsoft said it had revenue of $16.43 billion for the quarter ended March 31, 2011, which was up 13 percent from a year ago. Net income was $5.23 billion, or 61 cents per share, a rise of 31 percent and 36 percent, respectively.

The surge was led by sales of Office, Kinect and Xbox and a stronger economy.

But there are shadows, too, as results were dragged down by weaker revenues for its flagship Windows unit.

The report comes as Microsoft’s stock continues to lag, declining 14 percent for the year.

Buzz kill!

BoomTown livedblogged the call for Wall Street analysts:

2:30 pm PT: Peter Klein, Microsoft’s CFO, who sounds super peppy, outlined the strong quarter, especially for its Office products.

He also mentioned some glitches, such as Microsoft’s still-struggling efforts to increase revenue per search (RPS) in its longtime search and online advertising partnership with Yahoo and the slower growth of the PC sector upon which the software giant’s Windows relies.

PC should stand for “possibly crappy,” but good-boy Klein did not say so.

Investor relations dude Bill Koefoed also read through the news, sounding at times like a sports announcer on a cable television network.

“Quuuuaaadrupled…,” he intoned about one part of Microsoft’s business.

This all went on for a while, since Microsoft has a lot of divisions. Servers & Tools. Online Services. Entertainment and Devices. Fashion & Cute Tops.

Okay, not that one, but a girl can dream.

It was all fun and games until Koefoed got to the Yahoo problem, which Yahoo CEO Carol Bartz had used as a cudgel in her earnings report recently.

Yes, it is a bummer. But soon it was back to the happy land of Xbox!

Klein said he was pleased with the results in a jaunty manner, which made me desperately wish Microsoft CEO Steve Ballmer led the call.

Because he’s always one obnoxious query away from a volcanic popping off.

Which is why I love those Yahoo calls and Bartz.

Buzz kill!

2:54 pm PT: That was fast–the call was quickly into questions.

The first is about COGS–cost of goods sold–and how it impacts gross margins.

Klein said the expenses were volume driven. I’d explain, but then I would fall asleep.

The next question was about stock buybacks.

That might get the stock up. Yeah, said Klein, they’ll keep doing that–not that it has helped much on the share price front.

More and more questions, about the PC market, the issues at Yahoo (let’s get that RPS up!), the Windows Phone 7 business.

I’ll be honest, I was a bit bored and started reading a riveting Business Insider interview with TechCrunch’s Michael Arrington on his myriad conflicts of interest related to his tech investing while also blogging as a news guy.

Whatever you think about him, that dude is good copy.

Wait, back to growth rates for Office!

It’s going great, said Klein (hey, maybe Arrington will invest!).

The call wraps up on news of an upcoming investor conference, being held near Disney World.

Oooh, party time!

Microsoft had its annual Financial Analyst Meeting at its Redmond, Wash., campus yesterday, where BoomTown liveblogged the morning and afternoon sessions with the software giant’s top execs.

That included CEO Steve Ballmer, who talked about how a tablet device to compete with the Apple (AAPL) iPad was coming from Microsoft “soon” and also the company’s efforts in its eight “core” businesses.

And, because it is Microsoft (MSFT), there were lots and lots of slides to look at, which are all below from its panoply of execs on everything from finances to robotics to Facebook on the Windows Phone 7.

Here they all are for your data-crunching pleasure (and you can also read transcripts of the day’s events on Microsoft’s newly refreshed investor site.

CEO Steve Ballmer:

Ballmer_FAM_2010_Part1

COO Kevin Turner:

Turner_FAM_2010

CFO Peter Klein:

Klein_FAM_2010

Bill Koefoed, General Manager, Investor Relations:

Koefoed_FAM_2010

Craig Mundie, Chief Research and Strategy Officer:

Mundie_FAM_2010

BoomTown took the corporate All Things Digital jet–aka Virgin America, seat 10A–up to Redmond, Wash., today to attend Microsoft’s annual Financial Analyst Meeting, which also includes a passel of media drones like me.

I will be liveblogging the event all day, which is essentially a cavalcade of top execs from the software giant taking the stage and showing off their wares.

There should be a little bit of swanning, since Microsoft (MSFT) turned in very good financial results last week, posting a huge increase in earnings and revenue due to the uptick in PC sales and the intro of the Windows 7 operating system. Losses at its Online Services division remained high, so thank goodness for servers and tools!

Here we go:

8:15 am PT: I was late due to the completely confusing streets of suburban Redmond, all of which look exactly alike, as does every building on Microsoft’s sprawling campus. I am a streets of San Francisco girl, obvi.

In the Conference Center, though, things had not started well past the 8 am start time, as we await the entry of investor dude Bill Koefoed.

U2′s “Beautiful Day” was playing over the sound system, which it was not up here in the Pacific Northwest this morning–it was kind of cold and gloomy, a la “Twilight”–but hopefully will be for sparkly Microsoft execs. We’ll see!

Finally, Koefoed came out and started in on feedback, touting the newly renovated investor relations site, which he is “pretty proud of.” It is nice looking, as are most of Microsoft’s hand-out materials.

In fact, he sent me an excited note last week, because I posted Microsoft’s pretty fourth-quarter slides.

Dear Bill: You need much better things to get excited about! Like the new Magic Trackpad from Apple (AAPL)! Wait, I mean Windows Phone 7!

Koefoed moved quickly to point out last week’s strong results, which is no surprise. When you’ve got lemonade, make more lemonade!

Then he outlined the various Microsoft’s eight “core” businesses, such as Xbox, Bing, Microsoft Office, Windows Azure and, of course, Windows, that the company will be going over.

That’s a lot of core, isn’t it?

Some questions to be answered: Business PC refresh and share momentum? Impact of iPad/slates? Windows 7 phone? Expense control?

Beautiful or not, it was going to be a looooong day.

8:42 am: A jaunty Kevin Turner, Microsoft’s COO, bounded out. He tried to get the crowd more lively, but this was not to be unless there was a lot more coffee.

I had great hopes for a goofy quote this morning from Turner, who declared at the Microsoft Worldwide Partner Conference earlier this month about Apple’s antenna controversy: “It looks like the iPhone 4 might be their Vista, and I’m okay with that.”

I don’t know about you, but insulting a competitor by shooting off your own foot is a gift that keeps on giving to me.

In any case, Turner said Microsoft was now “leading with the cloud,” a move that the company had been resisting in the past. Now: All in!

He outlined all the various services for business customers. “We are the market leader in cloud services for business,” said Turner, noting Microsoft had been too quiet about the inevitable move of data and software services to big services in the digital sky.

(Actually, in its secret heart, Microsoft was hoping this whole Internet thing would go away and it would be back to a PC on every desktop, but that horse has left the barn, so it’s cloud time!)

Next up for Turner: The much deserved popularity of Windows 7. Of course, since Vista was Microsoft’s Antennagate–except much, much, much worse–it was not hard to be better.

Turner then moved on to bashing Google (GOOG) and other competitors. Turner put up some quotes from Jaguar employees, after the car company switched to Google for email and other services.

One said Google was like vinyl seats. Ziiiiing!

Next Turner victim: VMware (VMW)! He claimed its products were pricier and not cloudy enough.

As for Linux: Meh!

Oracle (ORCL): Customers don’t want to be locked into the land of Larry Ellison!

Cisco (CSCO): Just you wait, John Chambers!

9:19 am: Turner headed off and Chief Research and Strategy Officer Craig Mundie started in on his speech, titled “Reimagining Microsoft’s Future.”

That would be the client plus the cloud, natural user interface and something he called “working on your behalf.”

Mundie launched into his future-dude schtick, but he’s not exactly Alvin Toffler, so I started desperately mainlining the caffeine.

He talked about movable data centers, the “Internet of Things” and other cloud innovations, but there is no new idea here to blow your mind.

Is it too much to wish Mundie would talk about an invisibility cloak? Instead, it was the orchestration of data authority.

That will apparently be a new data marketplace product, codenamed Dallas, to shop for giant data sets and more.

Mundie than showed off some personalization-driven features in the Bing search service, which are also not new concepts.

For example, he showed a menu, embedded in a table, that might know what you like to eat at a particular restaurant you frequent.

This is what would be on my table and there is no need of a fancy computer table to know this: Donuts, donuts, donuts.

Speaking of which, FAM minions: Where the heck were my donuts?

Mundie then moved onto Kinect, once called Project Natal, the actually cool gesture interface for gaming that will be available for Xbox soon.

Finally, he finished up with a video clip of a medical triage assistant. Great, even less customer service from hospitals. The demo was flatly freaky.

The morning session wrapped up with a visit to the technology showcase to “expect the unexpected,” although I was not expecting that in any way, and then it was off to lunch.

Next up in the afternoon session: CEO Steve Ballmer at 1 pm PT.

Below, excerpts of The Wall Street Journal Digits liveblog of Microsoft’s earnings call, led by CFO Peter Klein and Chief Accounting Officer Frank Brod.

• Mr. Klein says results are a result of the momentum of its products, a focus on managing costs and the “beginning stages of a return in business hardware spending.”
• Strong demand for Windows 7 was “a prime contributor,” to results, he says. More than 10% of PCs world-wide are already running Windows 7, making it the fastest-selling operating system ever. But he adds that this 10% figure “also illustrates how much opportunity still remains.”
• Microsoft’s search offering, Bing, has achieved 10 consecutive months of growth, Mr. Klein says, and the mentions the benefit from the clearing of a search agreement with Yahoo.
• The call is turned over to Bill Koefoed, the general manager for investor relations, who will talk about more detailed results. He says Microsoft’s revenue grew 6% to $14.5 billion.
• Emerging markets grew more than 20%, he says, while mature markets grew in the single digits. The company saw renewed strength in the small- and medium-business market, and the company is seeing the return of the larger enterprise market in general.
• He says Windows 7 and innovations in PCs are driving growth in the PC market. Microsoft estimates that the PC market grew 25% year over year, with consumer purchases growing almost 30% and business PCs growing 14%. Netbooks were 10% of the total PC market for the quarter.

Read the rest of this post on the original site

It was back to normal for Microsoft, at least if you looked at its stellar results in the second quarter, which the software giant reported earlier today.

BoomTown liveblogged the company’s call with Wall Street analysts, which began at 2:30 pm PT today.

Microsoft (MSFT) has been through the financial wringer over the last year, announcing the first mass layoffs in the its 35-year history a year ago.

But after the markets closed today, Microsoft said its earnings for its fiscal second quarter handily beat expectations.

Net income for the period rose to $6.66 billion, or 74 cents a share, from $4.17 billion, or 47 cents a share in the same period last year. Meanwhile, revenue rose 14 percent to $19.02 billion.

Analysts had been expecting earnings of 59 cents a share, and $17.9 billion in revenue.

It’s hard to tell if Microsoft–which has been one of the grumpier tech companies publicly, due to its weaker results over the last year–would start to put on a happy face or not.

2:31 pm: Welcome to new CFO, Peter Klein (pictured here) for his first earnings call. He replaced Chris Liddell, whose kiwi-cute New Zealand accent will be missed.

Klein gave a big hello, which was made happier by the news he got to deliver. “We reported record revenue and record profits,” he said.

Thank you, consumers!

But Klein also noted that Microsoft did “not see return of enterprise spending growth,” which was the big bummer.

No thank you, business folks!

But working the cost side made that all okay, for now at least.

Then the call was turned over to investor relations dude, Bill Koefoed, who also noted that the results were “phenomenal.”

Koefoed went through the numbers reported, which were all in the press release.

2:47 pm: Klein came back, discussing the outlook, which is not as glum as any of the Microsoft quarterly calls over the last year.

Then it was onto questions.

The first was on what will drive sales going forward, besides the success of WIndows 7 operating system software.

Microsoft’s future results would depend on and be “in line with PC” business, said Klein.

What about costs–will Microsoft keep the screws on?

We’ll see!

Next question: More details on enterprise?

We’re working on it! “As the enterprise [business] picks up…we are very well positioned,” said Klein.

More enterprise questions. “We have a great product pipeline,” he said, but we can’t predict what will happen.

2:57 pm: How’s the shrink-wrapped retail business going?

Great!

I became numbed into a stupor by the dullness of the next several questions, all internal chair-moving queries and repetition of previous questions.

Finally, one about exactly what Microsoft might be increasing spending on!

Well, the still-unapproved search and online advertising partnership with Yahoo (YHOO), for one, said Klein.

Back to more dull ones, until one on when the MicroHoo deal will be approved by federal regulators and how Bing is going to keep growing market share, which it has been doing admirably.

Klein said nothing on either, but very politely.

Another sleep-inducing question and then one on Microsoft’s giant pile of cash and whether the compay would hand it back to shareholders.

Klein gave another nonanswer.

The last question was about the flat performance from the gaming unit.

Well, there is the upcoming Project Natal, said Klein, to look forward to. But–keeping up his newly hatched CFO equanimity–no news to report here either.

Microsoft (MSFT) announced much better than expected results for its first quarter of fiscal 2010–led by strong Windows and Xbox demand and cost discipline.

While revenue and net income were down, the results were a major surprise given more lackluster estimates.

Here are the software giant’s slides on the financial results, which you can enjoy all weekend long, as well as BoomTown’s liveblog of the Q1 earnings conference call.

Thanks, Bill Koefoed!–but who are those smiley folks on the front slide?

Here are the slides:

FY10 Q1 Slides MSFT –

Well, well, well, that financial imp at Microsoft–CFO Chris Liddell–pulled a fast one on Wall Street and turned in first-quarter earnings that blew away all estimates and even the whisper numbers.

While revenue and net income were down for the third consecutive quarter, they were not as bad as investors had expected.

Perhaps those Microsoft (MSFT) financial predictions were no good, but the results were a strong sign of recovery at the software giant.

BoomTown liveblogged the morning conference call with Liddell, which took place at 7:30 am PT–thanks for the Kiwi-laced wake-up call, Chris!

(You can see the financial slides of the Q1 performance here.)

7:34 am: “It might have been the bottom of the economic reset,” said Liddell in the opening. “I’m very happy.”

Still, Liddell, who has been a glum goose for many quarters now, could not quite do cartwheels, noting that the economy was “still challenging.”

He also still repeated his favorite term for the market, calling it: “The new normal.”

7:38 am: Other investor guy, whose name I always forget (and who is Bill Koefoed, by the way), got on and went through the numbers. He also sounded deeply relieved and noted that it looked pretty good out there.

Liddell returned and said Microsoft was “well-positioned” to exit the econalpyse stronger than competitors.

Not so bad, although he expected personal computer and hardware sales be weak still and was not promising anything.

The online and search and advertising partnership with Yahoo (YHOO) was also on track, said Liddell.

“In summary, I feel great about how we are executing,” said Liddell, who made sure to give credit to “cost discipline.”

It was nowhere near the strong performances of Google (GOOG) and Apple (AAPL) recently, but allowed Microsoft some much needed breathing room.

7:51 am: Question time!

The first was about when the launch of Windows 7 would start bringing home the bacon.

The next was about “channel inventory build,” which was like asking Liddell to be a soothsayer. “Net positive,” he opined.

The third question was about costs from the transition of the Yahoo deal and the contribution.

Costs will up front and there will be a contribution in the “hundreds of millions.”

Next: The future of cost cuts.

“I see that as the journey that never ends,” said Liddell.

Memo to PR head Frank Shaw: Cancel the truckload of caviar for a big honking party in celebration of these results. Stat!

7:58 am: I missed one question, since it was so boring, as was the answer.

Then a good one came about the deployment of Windows in corporate environments and elsewhere.

“All of the feedback we get so far is positive,” said Liddell, not that he is bragging or anything. “The sales in retail, we are expecting to be very good.”

Another cost question, this time about whether more investments are coming in the years ahead.

No ramping back, thank you very much!

The next question was about the impact of netbooks on the bottom line.

Not bad, but not huge, said Liddell.

What about display advertising online? In line with the weaker market, said Liddell, but it should improve.

8:09 am: PC demand? Liddell notes the “robustness” of the PC, which Microsoft has actually been pooh-poohing over many quarters.

Liddell said he saw better days ahead, perhaps because past ones had been weak, especially business PCs. “That can’t continue forever,” he noted.

A question about Europe. “Relatively weak,” said Liddell, while emerging markets were stronger.

“This calendar year is transition to next calendar year,” said Liddell.

A query about Windows 7 revenue recognition, which comes when Microsoft sells to OEMs.

8:14 am: More on OEMs, who are the big buyers of Microsoft’s operating system software.

Next up: Another question about outlook.

“Generally speaking, we are seeing good adoption of our products,” said Liddell, but the true rebound is coming next year.

The last question is about Windows Live.

It’ll get better, but next year, folks!

Translation, if you imagine Liddell channeling “Annie”: The sun’ll come out tomorrow. Bet your bottom dollar that tomorrow, there’ll be sun!

Enjoy this lovely video of the classic song:

As the wind-up act for the Financial Analyst Day at Microsoft today, its CFO, Chris Liddell, took the stage to try to put a shine on weak financial results that the software giant recently reported.

“So, what genetic disposition do you need to be a CFO? Essentially, you need to be miserable, you need to be the sort of person who takes drinks away from people at the end of a party,” said Liddell. “So, you know, my colleagues who have been giving you drinks all day, have told me to come out here and take most of them away from you.”

This was an unusually charming opening for typically dull CFOs, made even more so since it was delivered in Liddell’s jaunty New Zealand-Hobbit accent, which turns words like “share” into “sheeaar” and “schedule” into “shed-you-all.”

But no matter how cute the delivery, Liddell could not make the recent financial performance at Microsoft (MSFT) look adorable. The company missed revenue estimates by $1 billion in its most recent quarter.

Said Liddell: “And, not surprisingly, from a revenue point of view, it turned out to be a fundamentally different year than we thought it would. So, when I stood up here last year and said we thought our revenue would grow, it actually shrunk by three percent.”

Liddell dubbed the new economic situation the “new normal,” which sounds like it could be the topic on an “Oprah” show.

Still, Liddell, who has been a grumpier CFO than most during this econalypse–I once dubbed him “Glum Chris at the Recessiondome”–was more positive going forward.

“I can’t say this is good that we’re still down relative to where we were a year ago,” he said. “But, on a relative basis, it was a reasonable year from a shareholder value point of view, given the context of the environment that we had.”

Liddell said Microsoft was now operating in a “reset” mode, a term often used by Microsoft CEO Steve Ballmer.

“The economic path that we are all going to face, regardless of any industry, is going to be relatively subdued compared to what we’ve been through,” he said. “So, those companies that are going to drive superior shareholder value in the new environment are not only going to be the ones that mapping the reset in a very good way, but are going to manage the new normal in a particular way as well.”

That means having cash, controlling costs, pushing for innovation and market share, said Liddell.

He forgot to add judicious coupon-clipping!

After he was done, Liddell was joined onstage for an executive Q&A by Ballmer, COO Kevin Turner, Online Services President Qi Lu and, finally, Chief Software Architect Ray Ozzie, who was apparently in the special guest star role for this year’s meeting.

It was emceed by investor relations guy Bill Koefoed, who I must admit, is not even close to as dull as he is when reading all that legal mumbo-jumbo at quarterly earnings call.

(Even to my assistant Ed–to whom Koefoed’s voice is like Valium, since I listen to those calls on a speakerphone at All Things Digital HQ, and it puts him into a deep stupor.)

There were various questions for the execs–all men, by the way, although who’s counting? Well, okay, me!–including:

* Whether Microsoft might make more acquisitions.

“We don’t acquire as a strategy,” said Ballmer flatly.

* Its relationship with Yahoo (YHOO) going forward and if it might lead to even closer ties.

“If there was an implicit question are we interested in a full acquisition, the answer is no. Yahoo is happy to be independent, we’re happy to be independent, we’re delighted with search partnership,” said Ballmer even more flatly.

There were also a whole bunch of financial questions, most on the far side of wonky. Ozzie spoke only briefly about big computing ideas, which is his job at the software giant.

And then it was over and he and the other big execs headed for cocktails with those gathered.

And, last I saw, Liddell was not wrestling any drinks from the attendees. Not yet, at least.

Well, despite the news being as bad at Microsoft as it was at Yahoo (YHOO) earlier this week, the conference call after the software giant released its third-quarter earnings was 100 percent less naughty and 200 percent more glum.

In other words, while there were no F-bombs dropped, there were lots of E-bombs–as in econalypse.

Microsoft’s earnings and revenue took a big hit in its third quarter, with profits down 32 percent from a year ago on a six percent sales decline.

It was the company’s first-ever year-over-year quarterly sales drop.

There were also more than $700 million in charges from layoffs and investment declines, both a result of the weak economy. The culprit for most of the bad news was the decline in consumer and business spending on computers.

And Microsoft CFO Chris Liddell did not even bother to act as if there was any hope, painting a semi-apocalyptic picture of the business landscape that he predicted was not going to get better anytime soon.

Here’s BoomTown’s liveblogging of the call:

2:34 p.m. PDT: The call starts after some very stern marshal music was played. This turns out to be the perfect mood-setter.

First up, the investor relations guy who talks about all the rules, like those folks who come on after, say, a Viagra commercial and quickly list the scary side effects.

But scary was what Liddell was serving up from the get-go, as he pretty much spent the entire conference call talking about just how bad the economy has been, is and will be.

What’s most disconcerting perhaps is the fact that he was delivering the bad news in a cute-as-a-kiwi New Zealand accent.

Nonetheless, Liddell said the company had had to “adapt to a new reality” and that Microsoft was “more cautious than most about the state of the world economy” and–let’s not forget–the “economic pressures are both broad and deep.”

Liddell also noted that the recovery will not happen quickly, but be “slow and gradual.”

Perhaps this is not the right time to mention that both Google (GOOG) and Apple (AAPL) essentially killed in their recent earnings reports.

2:38 p.m.: Microsoft’s investor relations head Bill Koefoed–without any jaunty inflection whatsoever–delivered the numbers in that droning way that all financial types who deliver numbers on calls like this do.

My assistant, Ed, actually fell into a temporary coma from across the room.

Basic message of numbers: Bad.

2:54 p.m.: Back to Liddell for some forward-looking stuff.

Also not good, with consumer sentiment and spending weak, he said, there would be “significant pressure until market conditions improve.”

“In summary, it was a tough quarter,” reiterated Liddell, restating what he already stated and stated again. And then restated.

2:59 p.m.: Now to questions! Maybe things will look up here.

But…nope!

Thus, more worries about Microsoft’s growth, a weakness in sales and even some clucking over renewal rates of its operating system software licenses.

Then someone noted that it seemed as if Microsoft at least had its “arms around” the problems.

Would Liddell show any glimmer of hope?

“I guess we are all learning… how do I feel about the shape of the quarter [to come]?” he pondered.

Wait for it, wait for it, wait for it. Said Liddell, the sad-sack CFO: “I do not see anything that gives me any encouragement.”

Big, big sigh.

3:16 p.m.: Someone asked about one remark Liddell made about some “countercyclical” products, which might be bright spots in the Microsoft empire.

Indeed, new versions of the Windows operating system, Office, Exchange and its search offering are all set to come out in the next year.

Will they be gamechangers? Liddell was not saying, of course.

Finally, at the end, after a question about stock repurchases, there was some light at the end of the tunnel.

No matter what, Microsoft is still a cash-spewing engine.

“One of the great positives,” said Liddell was the company’s free cash flow of $20 billion, at an annual rate.

In other words, there is nothing like money stuffed under the mattress in times like these.

Earlier today Microsoft decided it would drop the bomb early by moving its second-quarter earnings conference call with Wall Street analysts to 8 a.m. PST, instead of 2:30 p.m. PST.

Microsoft earlier reported a sharp decline in revenues and net income, as well as layoffs of up to 5,000 employees and other cost cuts.

BoomTown, naturally, had to liveblog the Microsoft (MSFT) event.

8 a.m. PST

Could not get into call, as everyone and their mother wanted into this disaster.

Finally, the call was connected at 8:06 a.m. right in the middle of the bad news being delivered by CFO Chris Liddell, which has already begun to sink into the stock market, causing it to–um–sink even farther.

Liddell’s New Zealand accent was vaguely comforting, but it still cannot put lipstick on this pig. Down, down, down. And did we mention down?

8:09 a.m. PST

The call got handed over to Investor Relations GM Bill Koefoed.

“Adding a bit more color,” he said curiously, as he started to talk about the darkly troubling trends in the PC market.

At least Xbox 360 consoles were doing well, with six million units sold in the quarter. Too bad, it’s not a moneymaker! Well, actually, it has been a money pit, but at least the kids like it!

8:18 a.m. PST

Back to Liddell and more unhappy news on the economy, which was why he said Microsoft is not going to give guidance going forward.

“The economy has obviously declined further than we expected,” said Liddell.

Too obviously!

8:23 a.m. PST

Next up was CEO Steve Ballmer, who was also trying his best to make the bad news sound a little less bad.

But, he noted that the the econalypse was a “once-in-a-lifetime set of economic conditions.”

You can say that again, and Ballmer did.

But he soon was underlining Microsoft’s product pipeline and his bullishness on the tech sector.

“We are prioritizing, we are focusing,” Ballmer said. “[But] the pause the economy is imposing on our business will be just that.”

8:31 a.m. PST

First question was about whether Microsoft had acted quickly enough to cut costs amid the carnage.

Liddell answered this one: Of course!

Ballmer added that fixed costs at Microsoft make it hard to make better margins when revenue is declining.

But cost-cutting has now become priority one.

The next one was about the layoffs, including costs of it and if contractors are impacted.

Nope, though they will be getting cut too, said Liddell. But the 5,000 jobs announced are all just Microsofties.

Ballmer then jumped in and noted that the company would also be adding jobs, with a net of 3,000 jobs cut.

The third question was about buyback of stock, which was slowing, as execs said earlier. Wall Street loves buybacks. Also, what about PC growth?

Capital preservation was more important than ever said Liddell, noting that merger and acquisition activity will be lower in the next quarter.

As to the PC market–”a continuing or slight deterioration,” said Liddell.

The fourth question: More about the PC market and where to reset it.

Noted Ballmer: “It’s dynamic.” Which, I think, translates to “I don’t know exactly.”

The fifth question was about layoffs and costs again.

Will Microsoft cut again? Or do increasing expenses on a relative basis mean that Ballmer anticipates a rebound?

“We’re not used to down markets,” said Ballmer. “[But] our model is not for a quick rebound.”

Instead, Ballmer repeated his assertion that this was a wholesale resetting of the economy, which will build back on a lower level.

8:45 a.m. PST

GAAP earnings question. Zzzzzzz.

Next one was on whether Microsoft should commit to more buybacks of its stock instead of doing less?

Wall Street loves buybacks!

Sorry, but Microsoft was going to be more liquid going forward, said Ballmer.

The next question went back to why guidance for expenses is higher year over year, if the outlook was so bad.

Liddell noted it was a change in “momentum” of spending, which was slower.

8:50 a.m. PST

The questioner wanted to know about the annuity business versus the more volatile consumer sector.

Obviously, said Liddell, Microsoft likes regular money coming over the transom, but that could also decline in the future.

Now a question for Ballmer on what Microsoft might divest.

“I like our portfolio,” said Ballmer flatly.

The last question was about Yahoo (YHOO) and Microsoft’s ongoing talks about an alliance of some sort! Finally!

“I don’t think I have anything to say about Yahoo,” said Ballmer, after he laughed a bit with the other execs.

As he has previously noted, he still wants a search deal, said Ballmer. But not acquisition, added Liddell.

Ballmer noted that Microsoft was not an M&A company, in general.

In other words, Microsoft was still not buying Yahoo.

Microsoft, moving up its second-quarter earnings release from this afternoon to right now, said its financial performance took a major hit, with revenue up only two percent, to $16.63 billion, about $900 million below earlier guidance.

Net income was even worse for Microsoft (MSFT), off 11 percent to $4.17 billion, or 47 cents a share, from year-earlier earnings of $4.71 billion, or 50 cents a share.

Microsoft whiffed badly on Wall Street’s expectations of earnings of 49 cents a share on sales of $17.08 billion.

In addition, the software giant said that it would cut 5,000 jobs across many divisions over the next 18 months, starting with 1,400 today, pegging operating cost savings at $1.5 billion annually.

It will also make other cuts, including trimming salaries, travel, marketing and even office expansion costs, all over the company.

Perhaps most ominously, Microsoft said it would not give profit and revenue guidance for the rest of the year, because of the economy’s turmoil. Apparently, even the smartest of techies have little insight to this very foggy financial situation.

Microsoft blamed “PC market weakness and a continued shift to lower priced netbooks” for some of the declines, as well as the economy for lower IT spending.

“While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach,” said Microsoft CEO Steve Ballmer. “We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today.”

Here is Ballmer’s full memo to Microsoft employees about the layoffs and weak results.

Microsoft will talk to analysts at 8 a.m. PST this morning, which BoomTown will liveblog. The company was supposed to report after the markets closed, at 2:30 pm.

Here is the full press release below:

Microsoft Reports Second-Quarter Results
Modest revenue growth despite difficult economy; announces cost management initiatives.

REDMOND, Wash.–Jan. 22, 2009–Microsoft Corp. today announced revenue of $16.63 billion for the second quarter ended Dec. 31, 2008, a 2% increase over the same period of the prior year.

Operating income, net income and diluted earnings per share for the quarter were $5.94 billion, $4.17 billion and $0.47, declines of 8%, 11% and 6%, respectively, compared with the prior year.

Client revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks. However, strong annuity licensing drove Server & Tools revenue growth of 15%. Entertainment and Devices revenue grew 3% driven by strong holiday demand for Xbox 360 consoles with a record 6 million units sold in the quarter.

During the quarter, Microsoft showcased significant new product innovations by debuting Windows 7, Windows Azure, Office Web applications, Windows Server 2008 R2 and Office Communications Server 2007 R2. Microsoft also announced general availability of Silverlight 2, Exchange Online, SharePoint Online, Windows Small Business Server 2008, Windows Essential Business Server 2008 and a new release of Microsoft Dynamics NAV.

“While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach,” said Steve Ballmer, chief executive officer at Microsoft. “We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today.”

In light of the further deterioration of global economic conditions, Microsoft announced additional steps to manage costs, including the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing. As part of this plan, Microsoft will eliminate up to 5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months, including 1,400 jobs today. These initiatives will reduce the company’s annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million.

Business Outlook

“Economic activity and IT spend slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact,” said Chris Liddell, chief financial officer at Microsoft. “We are planning for economic uncertainty to continue through the remainder of the fiscal year, almost certainly leading to lower revenue and earnings for the second half relative to the previous year. In this environment, we will focus on outperforming our competitors and addressing our cost structure.”

Due to the volatility of market conditions going forward, Microsoft is no longer able to offer quantitative revenue and EPS guidance for the balance of this fiscal year. Microsoft offers operating expense guidance of approximately $27.4 billion for the full year ending June 30, 2009. This information supercedes the fiscal year 2009 guidance that Microsoft provided on Oct. 23, 2008.
Management will discuss second-quarter results, and the company’s qualitative business outlook on a conference call and webcast at 8 a.m. PST (11 a.m. EST) today.

Webcast Details

Steve Ballmer, chief executive officer, Chris Liddell, senior vice president and chief financial officer, Frank Brod, corporate vice president and chief accounting officer, and Bill Koefoed, general manager of Investor Relations, will host a conference call and webcast to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/msft. The webcast will be available for replay through the close of business on Jan. 22, 2010.