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:

Microsoft has had a high-profile week, between launching its new Windows 7 operating system and striking real-time feed deals with both Twitter and Facebook.

But Wall Street is not expecting quite as much excitement from the software giant’s first-quarter earnings, which will be announced before the markets open this morning.

Both revenue and profits are expected to be down from the same period a year ago.

So any beating of expectations would be seen as a big deal by investors.

Microsoft (MSFT) will hold a conference call on the results at 7:30 am, which BoomTown will be liveblogging–mostly to enjoy the lilting accent of CFO Chris Liddell.

Analysts are expecting the company to report 32 cents a share on revenue of $12.4 billion. In the same period a year ago, Microsoft’s revenue was $15.1 billion on net income of 48 cents a share.

Microsoft’s execs have been striking a tone of caution for several quarters, largely due to the falloff in sales of personal computers in the wake of the econalypse.

In the last quarter, the company’s income fell 30 percent, for example, and it missed revenue estimates by $1 billion.

There have been no new products of any consequence in the first quarter, although Windows 7–which has been well-received so far–is likely to boost results in the months ahead.

Office 2010 is also coming out in the first half of this fiscal year, which should also add to a better future performance.

Yahoo bested Wall Street expectations today, announcing stronger net income for its third quarter, despite an also expected decline in revenue.

The Sunnyvale, Calif.-based Yahoo reported net income of 13 cents a share, or $186.1 million, on revenues of $1.13 billion for the quarter ended Sept. 30, 2009, which was a decline from $1.33 billion the same period a year ago.

Wall Street estimated that Yahoo (YHOO) would earn just under seven cents a share on revenues of $1.12 billion.

The improvement includes a $98 million gain on a sale of the company’s stake in Alibaba.com in China, which is nonrecurring, as well as other cost-cutting by CEO Carol Bartz.

In addition, Yahoo’s expectations for the fourth quarter are more positive than those of investors.

Also in the earnings numbers: Yahoo had $4.5 billion in cash and marketable securities, as well as 13,200 employees.

But there was something to worry about: Search advertising revenue was off 19 percent and display was off eight percent at “Owned and Operated” sites on Yahoo.

Google (GOOG), in contrast, reported a seven percent rise in its recent third-quarter results last week, and its execs projected a mood of smooth sailing ahead and no more econalypse.

Nonetheless, overall, it was a solid performance from the Silicon Valley icon, especially compared to some of its recent and decidedly rockier earnings reports.

But, while investors can now breathe a little sigh of relief that the bleeding seems to have stopped, they will now likely focus on how much growth the Yahoo can have in the future.

That’s the next story for certain, starting with Yahoo’s analyst meeting next Wednesday, although today’s Yahoo management buzzword was “stablized.”

“With revenue coming in above our guidance and flat sequentially, we had a solid third quarter that signals our major businesses have stabilized,” said Bartz in a press release. “With new products like Yahoo! homepage, our brand revitalization campaign and expansion in the Middle East through Maktoob.com, our execution is improving and we’re focused on what we do best–being the center of people’s online lives.”

Added CFO Tim Morse: “In the third quarter we saw strength in key areas of our business. Our efforts to reposition Yahoo! are still in the early stages, but we’re confident that our investments in the business will enable us to capitalize on growth opportunities as the economy recovers.”

You can read all about it in Yahoo’s press release here, which includes performance tables of third-quarter results, or below without tables.

More to come at the conference call at 2 pm, which BoomTown will blog live!

Here is the Yahoo press release on the quarter:

YAHOO! REPORTS THIRD QUARTER 2009 RESULTS

Company Exceeds Revenue Outlook Maintains Strong Balance Sheet with over $4.5 Billion in Cash and Marketable Debt Securities

SUNNYVALE, Calif., October 20, 2009–Yahoo! Inc. (NASDAQ: YHOO) today reported revenues of $1,575 million for the quarter ended September 30, 2009, a decrease of 12 percent from the third quarter of 2008 and slightly above the second quarter of 2009. Excluding the impact of currency rate fluctuations and divested business lines, revenues for the third quarter of 2009 would have declined 7 percent compared to the third quarter of 2008.

Net income per diluted share for the third quarter of 2009 was $0.13, compared to $0.04 for the third quarter of 2008. Non-GAAP net income per diluted share for the third quarter of 2009 and 2008 was $0.15.

“With revenue coming in above our guidance and flat sequentially, we had a solid third quarter that signals our major businesses have stabilized,” said Yahoo! chief executive officer Carol Bartz. “With new products like Yahoo! homepage, our brand revitalization campaign and expansion in the Middle East through Maktoob.com, our execution is improving and we’re focused on what we do best–being the center of people’s online lives.”

:In the third quarter we saw strength in key areas of our business,” said Yahoo! chief financial officer Tim Morse. “Our efforts to reposition Yahoo! are still in the early stages, but we’re confident that our investments in the business will enable us to capitalize on growth opportunities as the economy recovers.

Revenues

* Marketing services revenues declined 12 percent and fees revenues declined 11 percent, compared to the third quarter of 2008.

* Marketing services revenues were flat and fees revenues increased 2 percent, compared to the second quarter of 2009.

* Marketing services revenues from Owned and Operated sites were $851 million for the third quarter of 2009, a 15 percent decrease compared to $1,002 million for the same period of 2008. The decrease was primarily driven by a 19 percent decline in search advertising revenue and an 8 percent decline in display advertising revenue.

* Marketing services revenues from Affiliate sites were $526 million for the third quarter of 2009, a 6 percent decrease compared to $561 million for the same period of 2008.

Cash Flow and Cash Balance

* Cash flow from operating activities for the third quarter of 2009 was $355 million, a 2 percent increase compared to $347 million for the same period of 2008.

* Free cash flow for the third quarter of 2009 was $258 million, a 20 percent increase compared to $215 million for the same period of 2008.

* Cash, cash equivalents, and investments in marketable debt securities were $4,503 million at September 30, 2009 compared to $3,522 million at December 31, 2008, an increase of $981 million.

Business Outlook

GAAP revenue for the fourth quarter of 2009 is expected to be in the range of $1,600 million to $1,700 million. Non-GAAP operating income before depreciation, amortization, and stock-based compensation expense for the fourth quarter of 2009 is expected to be in the range of $400 million to $450 million. Income from operations for the fourth quarter of 2009 is expected to be in the range of $135 million to $155 million.

Look, don’t just take BoomTown’s word for it–here are some of the slides Yahoo put out yesterday on its financial performance for the fourth quarter.

And who doesn’t love a good bar chart?

Using comparisons from a year ago, they show a lackluster picture of growth and momentum in general, but also that glimmer of the promise of what Yahoo (YHOO) could be again, just as new CEO Carol Bartz kept underscoring–actually, jack-hammering–at the analyst conference call about the earnings results.

Here are some of the Yahoo charts (click on them to make them larger), or go here to see them all:

Quarterly Revenue Trends (minus traffic acquisition costs, called TAC)

Adjusted Revenue Growth (GAAP, or generally accepted accounting principles)

Operating Cash Flow Trends and Adjusted OPC

Free Cash Flow Trends

Non-GAAP Net Income Per Share Trends

Key Operational & Balance Sheet Metrics

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.

Weaker results? Check.

Guidance going forward weaker still? Check.

Layoffs? Check.

Economy sucks? Double check!

Nonetheless, Yahoo CEO Jerry Yang said he “remained optimistic” about Yahoo and was going to “get fit” and power through its obvious troubles.

Get this guy over to the McCain campaign, pronto!

Actually, Yahoo’s news was just a bit more promising than the polls are going for the Republican Presidential candidate.

And, more to the point, it was not unexpected by analysts, all of whom were always expecting the worst.

Yahoo’s net income, for example, dropped 64 percent to $54 million or four cents a share, compared with $151 million or 11 cents in the same period a year ago.

Revenue at the Sunnyvale, Calif.-based Yahoo (YHOO) was $1.78 billion, slightly up from the $1.76 billion from last year’s third quarter.

In other words, bad but not the worst. That’s to come, apparently, as Yahoo execs also warned of a tougher outlook for the months ahead, in the advertising and other business arenas it competes in.

Already, they said, business was bad, most especially in Europe and Asia, although the U.S. started to weaken at the end of the quarter.

But, said Yahoo President Sue Decker, Yahoo was ready to “weather the storm,” and CFO Blake Jorgensen noted the company had plenty of cash on hand.

And page views were up, as well as search queries and revenue per search, which is good news amid the bad.

As reported here previously, Yahoo also confirmed it would cut it workforce by “at least” 10 percent of its global workforce–or about 1,400 to 1,500–and cut other costs too.

Said Yang in a separate memo to staff about the layoffs (yes, that is the punctuation he used):

“today as part of our q3 earnings release, we said that our goal is to reduce our current annualized cost run rate of roughly $3.9 billion by more than $400 million before the end of 2008. we are targeting non-headcount expenses wherever possible, such as facilities and outside services. however, because compensation expenses are the single largest part of our costs, we anticipate a reduction of at least 10% of our global workforce by year-end.”

Said Yahoo’s Yang in an overall statement in its full press release about its earnings (you can read that here, by the way):

“As economic conditions and on-line advertising softened in the third quarter, we remained highly focused on our 2008 strategy to invest in initiatives that enhance not only our long term competitiveness, but also our ability to deliver for users and advertisers in this more difficult climate. We have been disciplined about balancing investments with cost management all year, and have now set in motion initiatives to reduce costs and enhance productivity. The steps we are taking this quarter should deliver not only near-term benefits to operating cash flow, but should also substantially enhance the nimbleness and flexibility with which we compete over the long term. We enter this slowing market with competitive advantages as the destination of choice for consumers and a leader in providing online advertisers with the broadest set of advertising management tools and products in the industry. We plan to continue building on those strengths.”

Yahoo stock, dragging for weeks in the $12 a share range, rose to $13.05 in after-hours trading, up 98 cents or about 8 percent.

Here is the official press release from Yahoo (YHOO) on its third-quarter earnings results:

FOR IMMEDIATE RELEASE

This press release and its attachments contain forward-looking statements that involve risks and uncertainties concerning Yahoo!’s expected financial performance (including without limitation the statements and information in the Business Outlook section and the quotations from management in this press release), as well as Yahoo!’s strategic and operational plans. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the expected benefits of the commercial agreement with Google may not be realized, including as a result of actions taken by United States or foreign regulatory authorities and the response or acceptance of the agreement by publishers, advertisers, users, and employees; the implementation and results of Yahoo!’s ongoing strategic initiatives; the impact of organizational changes; Yahoo!’s ability to compete with new or existing competitors; reduction in spending by, or loss of, marketing services customers; the demand by customers for Yahoo!’s premium services; acceptance by users of new products and services; risks related to joint ventures and the integration of acquisitions; risks related to Yahoo!’s international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims; Yahoo!’s ability to protect its intellectual property and the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content, and distribution; general economic conditions and changes in economic conditions; the possibility that Microsoft or another person may in the future make proposals to acquire all or a part of Yahoo!, or take other actions which may create uncertainty for our employees, publishers, advertisers, and other business partners; and the possibility of significant costs of defense, indemnification, and liability resulting from stockholder litigation relating to such proposals. All information set forth in this press release and its attachments is as of October 21, 2008. Yahoo! does not intend, and undertakes no duty, to update this information to reflect future events or circumstances. More information about potential factors that could affect the Company’s business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, as amended, and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, which are on file with the SEC and available at the SEC’s website at www.sec.gov. Additional information will also be set forth in those section in Yahoo!’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, which will be filed with the SEC in the fourth quarter of 2008.