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:

Even as the Justice Department drills down on the deal (along with Canada now), a very helpful Google PR guy wrote to BoomTown in an email:

“The site attempts to answer questions that people have raised about the deal, address the agreement’s impact on advertisers and on competition, and serve as an information clearinghouse for journalists as well. … We’ll be updating the site regularly too, so you can use it as a one-stop shop for information about the agreement.”

Phew!

I, for one, am glad to learn that the outsourcing deal is NOT a merger (page 10) and that Toyota provides hybrid engine technology for Ford (Page 11).

But, curiously, the site touts the deal by using a woefully-out-of-context quote from a piece I did last week.

While I have been very much against the deal since it was announced, I did a post last week–in the interests of fairness–in which I featured the best arguments (not mine!) as to why the deal would probably not get blocked by the Justice Department.

Google used a quote from the piece on its site, but it is misleading (see the quote on the page below; click on the image to make it larger). [UPDATE: Google has thankfully removed my fake blurb, as seen below.]

I did write in a post on Sept. 18:

Thus, there’s not a whole lot for the Justice Department to hang a case on, in contrast to its case against Microsoft, which landed in court because of bullying behavior that actually took place before the case was waged.”

But, in the piece, I was clearly paraphrasing the reasoning of Google (GOOG) and Yahoo (YHOO) and in no way was it my opinion of the deal.

Saying there’s a chance Yahoogle will not get stopped by regulators is a bit different from saying I think this is a good thing.

I do NOT think it is a good thing.

In fact, here’s what I said in a piece the day before:

Thus, BoomTown is both gobsmacked and a bit in awe that [Google CEO Eric] Schmidt–now sitting atop the high-tech pig pile as CEO of the powerful search giant, Google–can, with a straight face, make the argument that everyone is wrong to be nervous about its deal with Yahoo to serve some of its search and text advertising, even though the pair control more than 80 percent of the search market.

Because while Google displays none of the bullying tactics of Microsoft (MSFT) in its glory days–think of it more like a giant that could accidentally squash all us little people with its big dumb feet–the worries about it amassing too much power are well-founded.”

And here’s what I wrote back in April:

Still, you have to almost admire the chutzpah of the search giant in making this move, if the sheer and unadulterated arrogance of it wasn’t so distracting.

Because, while Google has almost none of the obvious menacing aggression that characterized Microsoft when it thoroughly dominated tech (although all those beach bikes on its campus inexplicably creep me out a little bit), the company still cannot be allowed to have a monopolistic share of the market.

It is bad for advertisers, it is bad for consumers, it is bad for innovation, no matter how well-intentioned Google is.”

Somehow, neither of these two-thumbs-down quotes made it onto the Yahoogle-rocks site.

I feel like one of those misquoted movie critics in newspaper ads! (“Go…see…it…quick!!!,” when the entire quote was “Go home before you see even a second of it or you will be sick quick!!!”)

In any case, here are the 17 pages of slides from the Yahoogle site, embedded below:

Please see this disclosure related to me and Google.