Kara Swisher

Recent Posts by Kara Swisher

Welcome to Microsoft’s Nightmare: Weak Quarter and Still More Yahoo Questions!

Exactly what Microsoft CEO Steve Ballmer was talking to Yahoo Chairman Roy Bostock and Time Warner CEO Jeff Bewkes about last week in their mysterious New York tete-a-tete will likely be one of the many irksome questions execs at the software giant will be getting when it reports second-quarter earnings tomorrow afternoon.

Sources close to the situation said more intense chit-chatting has been going on among the trio about possible alliances and deals, but the outlook for something actually getting done is still unclear.

Oh, yes, there is also the expectation that Microsoft (MSFT) will show a missed target on its profits, as well as announce big job cuts to its 95,000-employee worldwide workforce.

Then, of course, all eyes will be on its forecast of what is to come as the econalypse continues.

There are less impressive outlooks for Microsoft’s Windows business, as well as revenue weakness, which goes right to the bottom line.

That means inevitable cutbacks in staff, as well as other cost-slashing all over the giant company in order for Microsoft to regain some momentum and revive its weak stock performance, which has been hit harder.

But what investors are actually looking for from the company–much as the nation is from newly installed President Barack Obama–is a big dose of hope and change.

In Microsoft’s case, that would still be: the articulation of a clear online strategy.

Microsoft mistakenly got everyone to focus intently on that for all of 2008 with its failed takeover attempt to buy Yahoo (YHOO), mostly for its search business, as it has turned out.

Ballmer has recently and frequently and publicly said he covets Yahoo’s search share in order to bolster his company’s distant third-place position.

Why has that been an error so far? Well, without a move at all after so much frantic and endless movement, Microsoft has only underscored its lack of strategy and its woeful position in relation to archrival Google (GOOG).

As my piano teacher used to say about me: A lot of activity, but very little productivity (and very bad music-making too).

Thus, whether Microsoft will actually produce anything more than dissonance with Yahoo or not–or Time Warner (TWX) online unit AOL either–should be the most pressing question from Wall Street.

Because, while the economic downturn will eventually pass, Microsoft will have to answer to what it has been doing all this time when it comes to Yahoo and the Internet at large.