Microsoft Gets Hit by the Econalypse: Earnings and Revenue Slide (Plus the Full Press Release)
by Kara Swisher
Posted on April 23, 2009 at 2:31 PM PT
Microsoft’s earnings and revenue took a hit in its third quarter, as expected, with profits down 32 percent from a year ago on a six percent sales decline.
Before one-time charges, the software giant earned $2.98 billion, or 33 cents a share after one-time charges, on revenues of $13.65 billion.
The weak results were relatively in line with analysts’ estimates of 39 cents a share on $14.1 billion in revenue.
It was the company’s first-ever year-over-year quarterly sales drop.
But Microsoft stock was up in after-hours trading, after also rising today before the market close by 14 cents, up .75 percent, to $18.92.
Costs from layoffs of $290 million and a $420 million impairment charge on investments also hit the bottom line at Microsoft (MSFT).
The company announced those first-time mass layoffs in the previous quarter. No further layoffs were announced today, despite rumors that they might be.
The culprit for most of the bad news was the decline in consumer and business spending on computers, since half of Microsoft’s operating income comes from sales of its Windows operating system.
But its online services also got hit badly, with a 14 percent decline in revenue from a year ago to $721 million. Losses doubled to $575 million. Oof!
Thus, Microsoft execs better hightail it down to Yahoo (YHOO) some more to strike that long-simmering search and advertising partnership deal.
BoomTown will be liveblogging the earnings conference call soon, but until then, here is the Microsoft press release:
REDMOND, Wash.–Apr. 23, 2009–Microsoft Corp. today announced revenue of $13.65 billion for the third quarter ended March 31, 2009, a 6% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $4.44 billion, $2.98 billion and $0.33 per share, which represented an increase of 3% and declines of 32% and 30%, respectively, when compared with the prior year period.
The financial results for the third quarter ended March 31, 2009, included $290 million of severance charges related to the previously announced plan to reduce up to 5,000 positions and $420 million of impairments to investments. Combined, these two charges reduced earnings per share by $0.06.
Revenue in Client, Microsoft Business Division, and Server & Tools was negatively impacted by weakness in the global PC and Server markets. Revenue from enterprise customers remained stable during the quarter.
“With our continued R&D investment and our broad suite of products and services, we remain in a great position to compete and gain share in the marketplace,” said Kevin Turner, chief operating officer at Microsoft. During the quarter, Microsoft released the beta version of the Windows 7 operating system, which remains on track for a fiscal year 2010 launch. Development milestones were achieved on other products including Microsoft Office 2010, Windows Server 2008 R2 and Windows Mobile.
“While market conditions remained weak during the quarter, I was pleased with the organization’s ability to offset revenue pressures with the swift implementation of cost-savings initiatives,” said Chris Liddell, chief financial officer at Microsoft. “We expect the weakness to continue through at least the next quarter.”
Business OutlookMicrosoft offers updated operating expense guidance of $26.7 billion to $26.9 billion, including severance charges, for the full year ending June 30, 2009.
Management will discuss third quarter results and the company’s business outlook on a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today.
Comments
Looking back in my “Those who don’t know history are doomed to repeat it” file, I see this is where Microsoft’s main rival (this time around Google) has the champ down for the count, but manages, totally on its own, to snatch defeat from the jaws of victory.
So, what will the formula be this time? With two new administration guys with track records for replacing Microsoft bloat with Google goodness in state and local governments, what could possibly go wrong???
Well, a whole lot of things could go wrong, but space does not permit me to even list the things that are trending in that direction.
I just hope that Google keeps their eyes on the prize, which at minimum should involve displacement of a significant number of Office desktops. Search is good, ads are good, but the number one “killer app” right now is that so many people when they first set out to do something think to “Google it”. Cutting those choices off (Google pages, Google video) in order to herd users into more “strategic” sub-products is fraught with peril, particularly in areas where MS might be cooking up better alternatives.
Posted by Mac Beach at April 23rd, 2009 at 7:42 pm