Microsoft: 'Pressures are broad and deep'

In its earnings conference call, the software maker says it remains "more cautious than most" about the global economy.

After reporting its first-ever quarter in which sales dropped from the year-earlier period , Microsoft had more distressing news for investors.

In an earnings call with financial analysts, Microsoft Chief Financial Officer Chris Liddell warned that things continue to look tough in the global economy, describing the conditions as the worst in the company's 30-year history.

Microsoft CFO Chris Liddell
Microsoft CFO Chris Liddell: 'We remain more cautious than most about the state of the world economy.' Microsoft

"We remain more cautious than most about the state of the world economy," Liddell said. "Economic pressures are broad and deep."

His comments are in contrast to statements by executives at EMC and Intel , who held out hope that the worst could be behind them.

Liddell noted that emerging markets, which had been outpacing mature markets for many quarters, actually did worse in the quarter just ended, with demand down as much as 20 percent.

On the PC side, Microsoft noted that the overall single-digit decline in unit shipments was thanks only to Netbooks , which now make up 10 percent of total PC sales. Sales of traditional non-Netbook computers were down 15 percent to 17 percent, compared with a year ago, Liddell said.

One area of strength for Microsoft was the fact that the company's business customers continued to renew long-term licensing deals.

Although Microsoft was hiring even as it laid off workers, the software maker ended the quarter with 800 fewer employees than it had when it started the quarter.

Liddell didn't give a specific forecast for the current quarter.

"We expect the overall spending environment to remain difficult," he said. The company did say it is cutting its expectations for its operating expenses, now saying it may cut up to $2.5 billion from its initial cost forecast, reflecting a further $1 billion in expense reductions. It also is cutting $200 million from its January estimates for capital expenses.

Liddell was also cautious when looking further out. He said that the company expects macroeconomic conditions to remain "challenging" through the rest of the calendar year. For "calendar year 2010, there is some potential for market conditions to improve, but it is clearly too soon to call," Liddell said.

 

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