How low can Microsoft go?

Very low, it seems, in announcing really bad fourth-quarter earnings, missing Wall Street revenue estimates by an astonishing $1 billion.

Talk about a game of extreme limbo.

After the market close Thursday, the Redmond, Wash.-based tech giant reported that fiscal fourth-quarter net income fell to $3.05 billion, or 34 cents a share, from $4.3 billion, or 46 cents a share, in the same period a year earlier.

Revenue for the period ended in June fell 17 percent to $13.1 billion. Wall Street had been looking for earnings of 36 cents a share on $14.37 billion in revenue, according to data compiled by Thomson Reuters.

Online advertising revenue took a big hit, decreasing $86 million or 14 percent, to $529 million, as the display advertising business got hard hit.

No surprise–Microsoft (MSFT) shares have been taking a beating in after-hours trading.

BoomTown liveblogged the earnings call.

2:32 pm PDT: The conference was kicked off and Microsoft CFO Chris Liddell–whose jaunty New Zealand accent I never tire of–came on right away, pointing out the very obvious bad news in several different ways, although also trying to find some kind of silver lining.

The quarter, he said, “marks the end of one of the most difficult [periods], but also most encouraging.”

The darkness has a dawn, he noted: “In my mind, we are a stronger company than we were a year ago…but we need to lift our game to a new level in 2010.”

You can say that again!

So Liddell did, saying that “there are some signs that we have at least seen the worst” of the econalypse, and “looking forward, we do not expect trading conditions to get worse.”

Well, how could they?

2:35 pm PDT: Microsoft’s investor relations guy went over the numbers. Crappy results, but meaningful cost savings.

Read the official press release here.

2:48 pm PDT: Liddell came back on and he said this would be one of the most “interesting” years, especially due to a spate of new product rollouts coming, such as Windows 7.

He did some forward-looking, talking about a variety of arenas at Microsoft, from the games business to its product launches to tax rates.

Microsoft has, despite the economic turmoil, a great balance sheet in terms of cash–with over $30 billion.

I think I found a gold lining.

2:56 pm PDT: Question-and-answer time.

The first was about spending on personal computers, which hit Microsoft badly on the downside, said Liddell.

But, as a refresh cycle kicks in, he noted that average selling prices will go up.

It would eventually get “better,” which Liddell pronounced, bitter.

Irony alert!

The next question was about margins. Microsoft has tried to cut costs, said Liddell, although it would never completely offset the bad economic conditions. And he was not making promises.

A follow-up on buying back more Microsoft stock. Nope, because “we’re still not sure we’re out of the woods.”

The next question was about what customers are saying about the Windows 7 upgrade and about server shipments.

No surprise, but server shipments are weak. “We don’t see a lot of pent-up demand in that area,” said Liddell.

As to PCs and Windows 7, he said he has more hopes of people being more likely to start to move over. Or, at least, prepare to do so.

“Then, you start to get into a much more virtuous cycle,” said Liddell.

A question on whether expenses can be slowed more.

Sorry, analysts! Nope.

Another question on looking at PC-refreshing. We’ll see, said Liddell.

Another expense question. Hey, analysts, you might want to stop asking since Liddell is not going to suddenly say Microsoft is lopping off more employees–at least, not right now!

Plus, there are those pricey upcoming product launches, said Liddell, which is going to take some dollars.

“There are a series of relatively small items, which add up,” he said.

3:09 pm PDT: An annuity question. Zzzzzzzzz.

Analysts continued to try to get Liddell to predict when things were going to take off again and return to the golden times when Microsoft was a regular financial powerhouse.

It was admirable that he refused to take the bait and maintained his tone of semi-doom and lessening-gloom.

“I would not promise that it is going to be significantly better,” said Liddell.

3:18 pm PDT: A question about the latest launch of Office in 2010 and its impact on financials.

Liddell said he did not see a significant impact until 2011.

The next question was also one on revenue: “Is revenue going to grow?” asked one analyst in a kind of desperate-sounding way.

Liddell said Microsoft would be watching costs, which would help. As to revenue, which is less controllable, he could not say.

3:22 pm PDT: Although there have been no queries about Microsoft’s discussions with Yahoo (YHOO) about a search and online advertising partnership–which will cost the company a pretty penny, if struck–there was a question about Google (GOOG) and its Chrome operating system.

“We still believe that people will want a client and an Internet-based experience,” said Liddell.

Translation: Google is a mouse that roared!

The final question was about how various geographies are doing. Asia and emerging markets are a place for growth, said Liddell, followed by North America, especially relative to Europe and Japan.

But, the tone of the earnings call? Economically speaking, it’s still a small world after all.

Yahoo and Microsoft are still seriously talking about a search and partnership deal, never-ending discussions that might or might not come to fruition. But most investors will be focused on real results this week, as both tech giants report quarterly earnings.

But, after a ho-hum performance last week from Google (GOOG), Wall Street is not expecting much from either, as the econalypse continues to take its toll on financial performance.

Yahoo (YHOO) will report its second-quarter earnings at 2 pm PDT tomorrow, while Microsoft (MSFT) will report on Thursday at 2:30 pm PDT.

The last quarter was weak for Yahoo, due to the depressed online advertising market, which is its biggest business.

And Wall Street is expecting more of the same, although perhaps with some signs of recovery and improvement after major cost cuts at the Silicon Valley icon by CEO Carol Bartz.

According to a round-up averaged by Thomson Reuters (TRIN), analysts think Yahoo will have revenue of $1.14 billion and earnings of eight cents a share, not including special charges due to recent layoffs and taking out commissions paid to advertising partners.

A search deal, if struck, could have a dulcet impact on Yahoo’s stock, which has been up strongly in the quarter.

And the industry is also hoping for some bump from the introduction of Yahoo’s redesign of its front page, code-named Metro, which it has been testing for a dog’s age now and will debut soon.

Shares of Microsoft have also been doing well recently, although it is not expected that any search deal will have much impact on its stock or, really, its actual business.

Search is a very small part of Microsoft’s portfolio, despite all the focus on its innovative new Bing search service. Instead, as always, the Redmond, Wash.-based company is squarely dependent on the performance of its dominant software products, Windows and Office.

Last quarter, Microsoft CFO Chris Liddell was very grumpy about the economic outlook and it is likely to be a repeat performance on Thursday, albeit with some encouraging signs of the lessening of the decline.

Still, analysts expect Microsoft to get hit from the continued weak sales of personal computers, which are chock full of its software.

On average, according to Thomson Reuters, analysts think Microsoft will have revenue of $14.38 billion in its fourth quarter, earning 36 cents a share. That’s off just over 10 cents in earnings from last year’s 48 cents per share.

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.

In BoomTown’s ongoing series, “Microsofties on Parade,” I spent some time earlier this week with Stephen Elop (pictured here), president of Microsoft’s Business division.

Reporting directly to CEO Steve Ballmer, Elop is a newbie, having gotten to Microsoft (MSFT) only a year ago.

Which is why he is enthusiastic in his determination to tell the world that the software giant has gotten the open religion and is becoming “the most interoperable company in the world.”

Elop said that humdinger earlier this week, when he was in San Francisco for an onstage Q&A with Tim O’Reilly at the Web 2.0 Expo.

The statement was met by a show of “no” hands, after O’Reilly asked who in the audience thought that was true.

Still, Elop pressed on, also hinting that Microsoft’s Office products–Excel, PowerPoint, Word–could even be coming to the Apple (AAPL) iPhone.

“Not yet, keep watching,” said Elop, whose portfolio has purview over Office, as well as the Dynamics business applications division and Unified Communications products.

I suppose Elop can be that cheeky, after a lot of Silicon Valley experience as COO of Juniper Networks (JNPR) and CEO of Macromedia, which was acquired under his tenure by Adobe (ADBE).

Or, it could be that he knows from having five kids–including triplet 10-year-olds–that patience is a virtue and that there might be a day when more hands might shoot up.

In any case, here is a video interview I did with Elop, where he talks about making Microsoft a more open and innovative place, the changing business model of software and more:

There it was again–like the gnarly ghost of Christmas past–in the Los Angeles Times this week. But this time Lloyd Braun wasn’t going to take it anymore.

The object of his ire was dropped right in the middle of a blog post on how Yahoo was “reversing its Hollywoodification” with–egads–no more reserved parking spaces for top execs at its Santa Monica offices.

The Times said the new rule “signals a stark new era of austerity that overshadows the elimination of the last vestiges of the corporate culture war spurred by the hiring of former Warner Bros. chieftain Terry Semel and ABC’s Braun.”

Knock, knock, L.A. Times! Because that war is actually still raging at Yahoo (YHOO)–although the parking spaces carry little symbolic weight anymore at the company, which has much bigger problems to solve these days.

But even more unusually, the piece also abruptly dropped in old allegations the newspaper had included in a devastating story in November of 2005 by Chris Gaither about Braun and Yahoo’s media push at the time, titled “Can Yahoo Sign on to Hollywood?”

It was noted in the post as an aside:

(Braun also converted a conference room with a patio into his personal office and requested a corporate jet for the Santa Monica office. Oh, and there was the time he reportedly took an umbrella without paying for it from the Yahoo store on a rainy day and then asked the clerk who requested payment: ‘Do you know who I am?’ He later explained that he just wanted to make sure the clerk knew he was good for it. But we digress).”

Digress is right, because it turns out, the bulk of those juicy anecdotes about him in the new blog post and the old story actually don’t check out, after extensive reporting BoomTown had done previously and this week too, talking to a range of key execs at the company at the time.

Thus, when I saw the Times post this week, I contacted Braun (pictured here) and sent him the link. He quickly responded via email:

“I am not an umbrella thief–and I promise I never will be. I never once asked for a corporate jet. I was and continue to be a big fan of Southwest Airlines. And I certainly never engaged in any kind of office construction while at Yahoo.”

Braun–who now runs his own online and traditional media production company called BermanBraun in L.A. with Gail Berman–also said he had immediately asked the Times for a correction of the blog post, as he says he did three years ago when the original story ran.

Times Business editor Sallie Hofmeister, whom I also contacted (but who was not in charge at the time of the 2005 piece), said the Times was looking into the situation and wrote in an email to me:

“The story we published in 2005 was a reflection of the sentiments within Yahoo at the time. We worked very closely with Yahoo on the story, so the company’s top management had every opportunity to challenge our reporting. After the story ran three years ago, neither Yahoo nor Lloyd requested a correction and no correction ran. What you hear from people today probably would be different than what they would have said three years ago. Lloyd is long gone and so are the tensions of entertainment’s invasion at Yahoo. People’s recollections also change. Enemies then are friends today.

“As for blog post, we strive for accuracy and when people in our stories take issue with our coverage, we take them very seriously.”

So do I.

Thus, it is long past time to set the record straight and put to bed a fable of raging Hollywood high-handedness–with too-good-to-be-true-because-they’re-not, clichéd lines like, “Do you know who I am?” and filched umbrellas.

Why bother looking into it at all these years hence? Well, for one, it is just not fair for inaccuracies about Braun to remain, complete with a never-die life on the Web and a nagging perception that he was some digital version of Ari Gold from “Entourage.”

But, more importantly, the struggles at Yahoo back then have everything to do with what is going on now. And that is a company culture at war with itself about what it is and should be.

I have, in fact, been collecting string on Braun’s alleged escapades for years, mostly from Yahoos. I was fascinated since, like a game of telephone gone awry, those who worked with Braun closely and would know, told a different story from some of those in Sunnyvale, who might not.

That did not stop many there from telling various stories about Braun, almost none of which were accurate when I actually followed up.

Because of that, I started to look very closely at Yahoo to figure out why such fallacies went unchecked about him and later, about an ever longer string of departed execs.

But let’s start with what was clearly true in that 2005 piece, which began with another parking kerfuffle and a hissy-fit email from a new Yahoo exec, recruited from Fox, threatening to tow “someone” who parked in his assigned place.

It was a classic opening, trying to show in an anecdote the clash that was going on at Yahoo at the time.

And it was an apt one. There was indeed a lot of resistance to the decision by then-CEO Terry Semel, who was pushing Yahoo as a media company.

To do it, Semel hired Braun–a highly successful Hollywood figure (think being key to initiating and developing “Lost,” “Desperate Housewives” and “Grey’s Anatomy,” and you have a good idea of his stature)–to pull it off at a big new and splashy office complex in Santa Monica.

Thus, the lines were drawn by some at Yahoo HQ, where execs mostly work in cubicles and where a we’re-all-equal ethos prevailed among some of the techie old guard especially, at least in their skewed perceptions of themselves.

(Guess what? They do work in cubicles, but some Yahoos in Sunnyvale are more equal than others.)

Still, back in 2005, it was easy to make an ebullient, brash and sometimes abrasive entertainment exec like Braun into a tidy little caricature and mock the idea of his task.

And who was hired to make new and innovative kinds of online programming hits, much as Braun had on television so well.

There is no doubt there were tensions. The Times story began focusing on the level of distrust, which in my estimation–I also was watching Yahoo closely at the time–was mostly from the tech side and mostly without interface with those in Los Angeles.

But, as Gaither noted correctly:

Yahoo’s ability to blend the cultures, milking each for what it does best, will be key to reaching its ultimate goal: to build on its success as the most visited destination on the Web by leveraging the links between content and the technology used to create and deliver it.”

Unfortunately, the Times story then launched into a series of really broad clichés about Hollywood versus Silicon Valley, using the typical “conspicuously expensive car” in LaLaLand versus the “energy-saving” one in Geekville.

(Again, my experience is that the tech folks always seem to have Porsches too, much as many Hollywood slickies drive Prius hybrids.)

The story went on to talk about the arrival of Semel, whom Gaither reported was seen as not as Hollywood at first as was expected by some wary Yahoos. He then got to Braun, who apparently was.

That’s where the problems come in, first by making it seem as if Braun was responsible for the pricey lease for the new Santa Monica offices at the Colorado Center.

Actually, according to top execs like Dan Rosensweig–Braun’s direct boss–as well as sources close to Semel and many other execs involved, that facility’s planning was directed largely from Sunnyvale, as most such projects are.

Braun did give an interview when the lease was announced, but was in no way the driver of the building’s renovation, which was actually being done by the company Yahoo rented the space from.

Next, came an assertion that the execs in Santa Monica got “Hollywood-style perks,” pointing out that Braun had “converted a conference room with a patio into his personal office. He also reserved a parking space close to the elevators for his car.”

Well, Braun did have a reserved space, which was no real crime to my mind, and which was actually not particularly close to the elevators.

How do I know? I have walked Braun to his car in the parking garage, which is about as nonluxurious as it gets, as opposed to Yahoo HQ, which used valets.

More importantly, Braun converted no office space and was assigned a temporary office elsewhere during the renovation, according to a panoply of execs and workers at Yahoo, such as Rosensweig, Jeff Weiner, Scott Moore and sources close to Semel.

It was a good office–after all, Braun was the boss of the Media Group.

And while both offices did have patios, the large outdoor spaces were also kind of dingy, especially compared to the manicured lawns of Yahoo HQ. And the patios were accessible to many parts of the floors, as I noticed on my many visits.

(As an added note, after the renovations were complete, Braun’s official office was not by any means fancy and was very standard in its drone-like look.)

The worst part was the next line: “Yahoo’s top executives drew the line when Braun asked for a corporate jet,” which was followed by a stunning quote by Semel.

It read:

The reaction was basically, ‘No,’ said Semel, who does not ask Yahoo to foot the bill when he flies to Northern California in his own private plane. ‘A lot of the more traditional media companies are doing their best to scale back on some of the perks and put the investment into the products and the consumers.’”

But, top Yahoo execs have uniformly told me over the years and this week that such a request from Braun never happened.

What was actually occurring, again directed by Yahoo’s Sunnyvale HQ, was an analysis about whether the company should start a charter air shuttle for the many engineers in its Burbank facility, working on its then-Panama search project, and employees at its growing Santa Monica facility.

There could be up to 20 workers going back and forth north daily, and the Southwest Airline bills were getting high.

Thus, a look-see to determine if an L.A.-Sunnyvale shuttle for everyone was needed. But it was conceived as a less-than-high-end plane, essentially a puddle-jumper that left at 7 a.m. and came back at 7 p.m.

Braun thought it was a good idea to examine and told Rosensweig, who was in charge of looking at the charter idea. But Braun was not part of the consideration of it.

Ultimately, Semel nixed the idea as too costly, and Braun did not object.

Why Semel seemed to tell Gaither that is curious. But a person familiar with Semel’s thinking said he was only referring to an company shuttle for everyone and not a corporate jet just for Braun and his minions, as the story opaquely implied.

“The discussions over the charter had nothing to do with Lloyd,” said the person. “And he did not ever ask for a corporate jet ever.”

Rosensweig, Weiner and several other top execs at the highest echelons–many of whom did not get along with Braun–support this version, on the record.

“I never saw anything out of the ordinary or Lloyd playing by Hollywood standards,” said Vince Broady, who worked for Braun, after being brought to Yahoo by Rosensweig. “I mean, Lloyd is a colorful character, which makes people notice him, but the idea that he was more difficult than anyone else was overblown.”

There is no doubt why Braun would attract attention–he is very noticeable and had a long and bruising career in Hollywood, with lots of stories of his dishing it out. He’s a genuine character, indeed, but not really that unusual compared to others in the entertainment sector, except perhaps to some at Yahoo.

Thus, I have no doubt, though, that such a story went around that Braun did desire a jet of his own and that Gaither heard it told, just like this most incredible of anecdotes in the piece.

The infamous umbrella!

Here is what Gaither wrote:

Braun’s long career in Hollywood has led to some awkward moments and misunderstandings inside Yahoo–and provided gossipy fodder for critics eager to cast him as a technically illiterate egomaniac.

According to one widely recounted tale, on a rainy day Braun took an umbrella from the Yahoo merchandise store without paying for it. Then, when asked for payment, he reportedly berated the store clerk, asking, ‘Do you know who I am?’ In fact, Braun’s representatives say, it was an innocent question to ensure that the clerk knew he was good for the money.

A Yahoo spokeswoman said the umbrella ultimately ended up in a pool of umbrellas available to all employees.”

I could not, obviously, find the clerk to whom Braun allegedly said this. But I can say that there are free baskets of umbrellas for staffers all over Yahoo, and top execs like Braun can also buy them at company stores and just use their names as part of an account system.

And while I have no proof, the use of such a clearly hoary Hollywood phrase–“Do you know who I am?”–seems like it was simply made up to me by critics bent on making it a much better story than it was.

To be fair, Gaither does portray it as a “tale” that was circulating around Yahoo. But that probably should have alerted him that it was a very tall one indeed and not very reliable–a kind of digital urban legend rather than an actual event.

That’s why I would not have used it, without a much more explicit explanation that it was more an example of the tensions at Yahoo between the media and tech units than it was reality.

Perhaps worst of all was the impact of the piece, which forever cemented Braun’s reputation as a Hollywood-gone-wild exec.

Most interesting was that, according to both the Times and Yahoo sources, the company complained about the tone of the piece, but never asked for a correction.

Why? Sources familiar with Semel’s thinking said that he and PR execs thought it would cause more attention to focus on Braun, if they contested the piece, and it was better to just let it go.

It was probably a bad decision, given it was in the L.A. Times, which had a lot of credibility.

And, indeed, the high-profile Braun was later slapped silly by Valleywag, as the Times piece kept circulating within Yahoo. By the next year, Braun became one of the gossip blog’s first targets.

Valley–which knows a good character when it sees one and likes to poke and prod many, many such Silicon Valley-linked figures in mocking glee (with varying levels of accuracy)–even had a countdown to when Braun would be fired.

Because of this kind of thing, Braun said he tried to get Gaither to take another look at the stories about him, and met with Times editors to get them to make corrections.

The Times said Braun never formally asked for a correction and instead just complained about the story. To me, that is the same thing, but I am not privy to the Times’s internal corrections process, and Hofmeister declined to elaborate.

In any case, looking back, Braun told me this week the lack of support from Semel and Yahoo to fight the story was hugely disappointing and was the moment he realized he felt he would probably have to leave Yahoo.

Eventually, the feeling was mutual, as tensions escalated even further after the article appeared.

Braun–who had a particularly rocky relationship with Rosensweig, which is now patched up–was eventually pushed out in late 2006, after Yahoo moved away from its media focus to drill down in search.

That turned out to be a bad move, as Yahoo got its head handed to it by Google in search efforts. And it has since seriously been in tailspin in the wake of a series of jarring events.

Those include: the sudden departure of Semel mid-2007; the appointment of Co-Founder Jerry Yang as CEO; a painful public struggle to redefine Yahoo; a botched takeover fight with Microsoft (MSFT); a messy proxy battle with Carl Icahn; a collapsed search partnership with Google (GOOG); a decimated stock price; a scarily declining graphical advertising market; wrenching layoffs; and the stepping down of Yang and the thus-far uncompleted search for a new CEO.

You get the idea.

More importantly, with the cutting off of its more vaunted media aspirations, Yahoo closed the door on possible innovative directions that could have made it more competitive now, as it continues to struggle to define itself.

One of Yahoo’s great strengths–and it still is–has been its content properties, which are the most popular, by and large, on the Web. Instead, stinging from the article and the fallout of it, the company retreated from pushing forward aggressively in media.

Had it not, I can imagine a host of stuff it might have done.

And, ironically, Braun is now working on an online project with Microsoft, a celebrity site that will debut early next year and use a lots of the concepts he worked on at Yahoo.

In the 2005 piece, Gaither quoted Yahoo exec Jeff Weiner as saying, in a Yin-Yang concept: “We’re often asked, “Is Yahoo a media company or a tech company?”

Sadly, that question never got resolved then and still has not today.

It almost makes one nostalgic for stolen umbrellas, controversial parking places, questionable patios and wrangling over corporate jets.

Almost.

For all the noise, it’s worth paying attention, because Monday’s outlook will be cloudy, as in cloud computing.

The day will include a speech from Microsoft’s Chief Software Architect, Ray Ozzie (pictured here), and others on, among other topics, its cloud infrastructure service initiatives–designed to match aggressive efforts from Amazon (AMZN) in the space.

There will also be a demo of Windows 7, which will hopefully put an end to the long Vista nightmare when it is eventually released. (To be ahead of the curve, see a video below of Microsoft’s CEO Steve Ballmer and founder Bill Gates showing Windows 7 off at our sixth D: All Things Digital conference in May.)

In all, a Windows geekfest!

Microsoft (MSFT) execs will probably be in a good mood given the decent earnings results the company announced earlier this week for the third quarter. Revenue was up nine percent to $15 billion, even though net profits only increased 1.9 percent to $4.37 billion.

Still, that was a pretty good performance in a down economy, due to strength in Microsoft’s powerful Windows and Office franchises. And despite–as usual–the weakness of its online division.

While the revenue for its MSN, search and advertising network grew to $770 million, or up 15 percent in the quarter, operating losses doubled to $480 million from $267 in the same period a year ago. Search grew more than display advertising, a forward outlook Microsoft that maintained.

And still no digital chief, long promised by Ballmer, in sight either. Sources said that head, who will lead the unit, has still not been selected. (BoomTown is officially beginning to feel sorry for longtime leading internal candidate Brian McAndrews.)

While PDC has never been an online-focused event–this is for the big-dog businesses of Microsoft–it will still be interesting that the event will focus on continued movement toward the cloud.

It’s an inevitable–though decidedly dicey–journey for the software-dependent behemoth. So, the continued transformation should be interesting to watch.

Here is the Windows 7 demo from D6:

Here is the full memo Microsoft CEO Steve Ballmer sent out to the troops about the big changes in its organization, including the departure of Platforms and Services Division President Kevin Johnson, in which he addresses Apple, Yahoo, Google and more:

From: Steve Ballmer
Sent: Wednesday, July 23, 2008 4:30 PM
To: Microsoft–All Employees
Subject: FY09 Strategic Update

I also have news about an organizational change and a transition in our Senior Leadership Team.

First, I want to thank you for your hard work and the dedication you showed during the past 12 months. FY08 was a milestone year. Our revenue jumped $9.3 billion to more than $60 billion. Operating profit grew 21 percent to $22.5 billion.

These outstanding numbers are the direct result of your commitment to the priorities I outlined last July. A lot has happened since then, but our fundamental strengths, challenges, and strategic goals remain largely the same. Therefore, my priorities are consistent with last year. In FY09 we must continue to:

1. Invest in the right opportunities;

2. Expand our presence with Windows, Office, and developers;

3. Drive end user excitement for our products;

4. Embrace software plus services; and

5. Focus on employee excellence.

By focusing on these five areas, we can continue to grow revenue, increase profit, and expand our market share. These priorities are also critical as we work to address key issues surrounding our business in the coming year:

· Windows: The success of Windows is our number one job. With SP1 and the work we’ve done with PC manufacturers and our software ecosystem, we’ve addressed device and application compatibility issues in Windows Vista. Now it’s time to tell our story. In the weeks ahead, we’ll launch a campaign to address any lingering doubts our customers may have about Windows Vista. And later this year, you’ll see a more comprehensive effort to redefine the meaning and value of Windows for our customers.

We also have to drive developers to create rich applications for Windows. With Internet Explorer and Silverlight, we have great tools for creating applications that run everywhere. But we also need to make sure developers have the .NET skills to write unique Windows applications using Windows Presentation Foundation. To keep today’s Windows applications alive, vibrant, and exciting, we need both—applications that run everywhere and rich client applications.

· Apple: In the competition between PCs and Macs, we outsell Apple 30-to-1. But there is no doubt that Apple is thriving. Why? Because they are good at providing an experience that is narrow but complete, while our commitment to choice often comes with some compromises to the end-to-end experience. Today, we’re changing the way we work with hardware vendors to ensure that we can provide complete experiences with absolutely no compromises. We’ll do the same with phones—providing choice as we work to create great end-to-end experiences.

· Business and enterprise: Our enterprise and server business has never been stronger—today we are on the verge of becoming the number one enterprise software company. We need to continue to push on all fronts—mail with Exchange, business intelligence with PerformancePoint, virtualization with Hyper-V, and databases with SQL Server. We have to drive our enterprise search capabilities, our unified communications solutions, and our collaboration technologies. And we must continue to compete against Linux in key workloads such as Web servers and high performance computing.

· Software plus services: Some people think software plus services is all about search. But it’s really about changing the way software is written and deployed. The future is about having a platform in the cloud and delivering applications across PCs, phones, TVs, and other devices, at work and in the home. It’s also about driving change in business models through advertising, subscriptions, and online transactions. Software plus services is a huge opportunity for us to deliver new value on the desktop and the server to all of our customers. This year at PDC, you’ll hear more about our cloud platform initiatives and the next versions of our Live and Online technologies.

· Google: We continue to compete with Google on two fronts—in the enterprise, where we lead; and in search, where we trail. In search, our technology has come a long way in a very short time and it’s an area where we’ll continue to invest to be a market leader. Why? Because search is the key to unlocking the enormous market opportunities in advertising, and it is an area that is ripe for innovation. In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas—we’re already seeing this in our maps and news search. Third, we are going to reinvent the search category through user experience and business model innovation. We’ll introduce new approaches that move beyond a white page with 10 blue links to provide customers with a customized view of their world. This is a long-term battle for our company—and it’s one we’ll continue to fight with persistence and tenacity.

· Yahoo: Related to Google and our search strategy are the discussions we had with Yahoo. I want to emphasize the point I’ve been making all along—Yahoo was a tactic, not a strategy. We want to accelerate our share of search queries and create a bigger pool of advertisers, and Yahoo would have helped us get there faster. But we will get there with or without Yahoo. We have the right people, we’ve made incredible progress in our technology, and we’ll continue to make smart investments that will enable us to build an industry-leading business.

As I mentioned earlier, I have important organizational news. Today we are announcing that the Platforms and Services Division will be split into two businesses: Windows/Windows Live and Online Services. We are also announcing that Kevin Johnson will leave the company. He will work to ensure a smooth transition.

Since 1992, Kevin has been a key contributor to many of this company’s most important achievements. As president of the Platforms and Services Division, Kevin has built an incredibly talented organization and laid the foundation for the future success of Windows and our Online Services Business. Over the last 16 years, through everything from his work as head of the company’s worldwide sales, marketing, and services efforts, to his leadership in transforming our field operations and repositioning the company to focus on opportunities in emerging markets, Kevin has played a vital role in this company’s success. There is no doubt that his passion and dedication will be missed.

Effective immediately, Steven Sinofsky, Jon DeVaan, and Bill Veghte will report directly to me to lead Windows/Windows Live. In the Online Services Business, we will create a new senior leadership position and conduct a search that will span internal and external candidates. In the meantime, Satya Nadella will continue to lead Microsoft’s search, ad platform, and MSN engineering efforts, and Brian McAndrews will continue to lead the Advertiser and Publisher Solutions Group. Both Windows/Windows Live and the Online Services Business are led by a strong group of executives on the technical and business side who have the talent and experience to address the challenges we face and drive the next generation of growth and success.

Looking ahead, I see an incredibly bright future for our company. As I said at the June 27th Town Hall for Bill, we are the best in the world at doing software and nobody should be confused about this. It doesn’t mean that we can’t improve, but nobody is better than we are. Nobody works harder than we do. Nobody is more tenacious than we are. We’re investing more broadly and more seriously than anybody else. Our opportunities to change the world have never been greater.

I look forward to working with all of you as we focus on our five priorities in FY09.

Steve