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.

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 Outlook

Microsoft 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.

G.ho.st, which stands for “Global Hosted Operating System,” is claiming it has a pending trademark registration for the tagline “no walls.”

G.ho.st has used the phrase for almost 18 months and is alleging that it pertains specifically to operating systems (as shown in the screenshot here).

In a letter sent earlier this week to Microsoft CEO Steve Ballmer and many others, which BoomTown has obtained, G.ho.st CEO Zvi Schreiber claims that the software giant has violated G.ho.st’s pending trademark for the ad phrase “no walls” and asks Microsoft (MSFT) to remove it from the company’s marketing materials.

Microsoft’s advertising campaign, which launched this month and had a rocky start with poorly received commercials featuring comedian Jerry Seinfeld and Microsoft Founder Bill Gates, uses the taglines “Imagine No Walls” and “Life Without Walls” to tout its Vista operating system. (See a screenshot of one example below; click on it to make it larger.)

G.ho.st, which is hosted by Amazon (AMZN), is yet another of many attempts to make cloud computing real and is competing to grab customers from the software-based Windows powerhouse.

A Microsoft spokesman, in an email to me, dismissed G.ho.st’s claims.

He said:

“We are aware of their concerns and believe their claims have no merit. We are not aware that Ghost has any trademark registrations or other rights that would be infringed by our ‘Life Without Walls’ campaign. To our knowledge, the right they have asserted, namely, a U.S. ‘registered trademark application,’ in the phrase ‘No Walls,’ does not exist.

“To our knowledge, Ghost has no trademark registrations or other rights in the phrase ‘No Walls.’ Even if they did, they cannot prevent others from using the words ‘no walls’ together in a sentence or in a descriptive manner in ad copy. Nor can they claim ownership in word ‘wall’ or the idea of a wall. The tagline for Microsoft’s new ad campaign is ‘Life Without Walls’–a slogan that, taken in its entirety, is not confusingly similar to Ghost’s purported ‘motto.’”

G.ho.st launched at our D: All Things Digital conference this past May (where Ballmer and Gates also appeared).

Here are two videos showing the start-up’s whole demo:

And here’s G.ho.st CEO Zvi Schreiber’s full email letter to Ballmer (with email addresses and other personal information redacted):

From: “Zvi Schreiber (G.ho.st)”
To: [Steve Ballmer]
Cc: [redacted]
Sent: Wednesday, September 24, 2008 12:15:41 AM (GMT+0200) Auto-Detected
Subject: G.ho.st Virtual Computer NO WALLS trademark

[4] E.g. http://www.microsoft.com/windows/
http://www.microsoft.com/windows/possibilities/products/default.aspx?vindex=2
http://www.microsoft.com/windows/possibilities/default.aspx?ocid=ftp

But–as many readers have requested–they will all be available in their entirety in this column.

In the less contentious spirit of DEMOfall and TechCrunch50, two demo conferences taking place simultaneously this week, we’re happy to bring you all the demos we had onstage at D6.

Last, but not least: the G.ho.st Web operating system, which lets users access their desktops from any computer with an Internet connection and is also a joint technology venture between Israelis and Palestinians.

The video of the G.ho.st demo is in two parts.

In part one, CEO Zvi Schreiber shows off the “Global Hosted Operating System,” which is hosted by Amazon, yet another if the many attempts to make cloud computing real.

In part two, Zvi goes over the various features and applications of the G.ho.st product and discusses the business plan and how the Israeli-Palestinian collaboration works.

But–as many readers have requested–they will all be available in their entirety in this column.

In the less contentious spirit of DEMOfall and TechCrunch50, two demo conferences taking place simultaneously this week, we’re happy to bring you all the demos we had onstage at D6.

First up is TransMedia’s Glide, an operating system that cuts across all operating systems.

There are two videos showing the whole demo below.

In the first one, TransMedia Chairman and CEO Donald Leka walks Walt and Kara through Glide on Mac OSX, Windows and the iPhone.

In the second, Leka demos the engaging kids’ version of Glide, shows how the OS runs in a browser on an iPhone and talks about the company’s business model.

The blogosphere immediately jumped all over the inevitable meme that after the Yahoo (YHOO) deal fell apart, Microsoft (MSFT) CEO Steve Ballmer’s job was at risk.

What with the problems with the new Vista operating system and the general feeling that Microsoft’s Internet strategy is in shambles, the argument that Ballmer would be shown the door by an impatient board and replaced by former CEO and Founder Bill Gates was clear.

Actually, not so such much at all, but that has not stopped all the noise.

Maybe Ballmer should go and maybe not, but I would like some proof that’s not in evidence as yet.

Instead, this TechCrunch story was typical, full of assertions as easy to make with certainty, but just as easy to knock down.

First, it noted that Ballmer being the “big driver behind this deal at Microsoft–some would say to the point of obsession” had made him vulnerable to the board, which he was trying to impress with a “transformative” deal and that he was worried about being fired.

Actually, I would be worried if Ballmer was not obsessed, given that more than $40 billion is an awfully big bet.

And has anyone noticed how typically ineffectual most boards are (see Yahoo, see Time Warner [TWX], see them all)?

I doubt there is a major force on the board of threat to Ballmer, except Bill Gates, who has never shown the slightest inkling of turning on his longtime partner.

Also, Gates himself fumbled with regards to the Web, and he even wrote a book about not doing that in 1995, called “The Road Ahead.”

Microsoft has bungled the Internet? It’s out of touch when it comes to the Web? Its troops have too many lifers who cannot innovate? Google (GOOG) has cleaned their clock? What!?

Of course, this has been news to exactly no one for about a decade now.

In any case, the Yahoo purchase was not the worst of ideas, if a bit obvious–although I have written several times that Microsoft should have bought up other Web 2.0 companies instead of Yahoo.

Both sides acted cloddishly, to be sure, and I am sure Microsoft’s board and execs are smarting a bit from misjudging this foray–I myself wonder how they did they not anticipate just how recalcitrant Yahoo would be.

But Microsoft’s withdrawal was clearly a better path than a hostile proxy fight.

So it did not work out (as yet)? So what? And if Microsoft stock rises tomorrow on the news, of course, all will be forgiven.

In addition, TechCrunch uses a source that is not exactly reliable, quoting “one secondhand account that leaked to us yesterday before the deal was called off,” who tells tales of Ballmer’s ranting and raving about how he wouldn’t let the board “crucify” him.

Ballmer can sometimes be a loudmouthed popinjay!? What ho?!?

Also news to exactly three people in the tech sector and they have been in an isolation tank since 1976.

More to the point, I got that exact anonymous email too, and it was credible and from someone with some good information.

But I felt I could not use the Ballmer info without more proof (also, I would need to know who this person is or find other non-anonymous-to-me people to bear its assertions out).

While compelling and sent in very good faith by an obviously smart person, as many of these types of emails are, I figured the lively emailer was probably from someone close to or even one of the many disgruntled employees of Microsoft who did not like the Yahoo deal.

There were lots of them, as BoomTown reported here, but I determined the emails were just wishful thinking.

But you be the judge!

Here’s two sections from the emails I got in their entirety related to Ballmer (with some minor edits to protect the sender) that TechCrunch clearly used verbatim, so you can see the whole thing rather than the pulled quotes:

Ballmer really does think his job is on the line if he doesn’t close the Yahoo deal, and soon. He’s worried after the fiasco that was the Windows Vista launch, then this, the Board will ask Gates to stay on while they find someone to replace him. Apparently this has caused Ballmer to be more of a tyrant than ususal, yelling and screaming at employees for almost no reason. Some Microsofties are secretly wishing the deal falls through so that Ballmer will get the axe and Microsoft will get new leadership.”

and

The particular incident… was that an exec made a comment about not having to worry about Ballmer anymore if this Yahoo deal falls through. He didn’t realize Ballmer was within earshot. Ballmer started yelling and screaming that this deal would go through and that the board wouldn’t be able to ‘crucify’ him over this. The scuttlebutt suggests that the board was ready to walk because they fear this deal is proving to be to big of a distraction, but Ballmer is obsessed with making it happen in order to protect his job. The board gave him one more week to get it done….many in Microsoft belive Gates will stay on if asked because even Gates realizes that Ballmer needs to go.”

Like I said: Wishful thinking.

This, of course, does not absolve Ballmer from having to come up with some very smart moves and fast to at least keep competitive with archrival Google and also figure out a way to protect its Windows software franchise in the wake of Google’s cloud computing effort.

But that is a longer and more vicious ground war that will go one for a long time.

Yahoo might be Ballmer’s Vietnam or Iraq, as still other bloggers are writing, but let’s keep in mind that the first went on for decades and the second, unfortunately, is still slogging on.