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Microsoft sees business tough all year

Company will have to step up its game even further, although it may have seen the worst, CFO Christopher Liddell told analysts on Thursday.

Although Microsoft may have seen the worst of the economic woes, CFO Christopher Liddell said he expects business to be tough for the remainder of 2009.

"The economy continues to be challenging and we need to lift our game," Liddell said during a conference call with analysts, following the company's reporting of lower-than-expected quarterly revenue.

Microsoft CFO Christopher Liddell
Microsoft CFO Christopher Liddell Microsoft

Liddell said the company doesn't expect to see things pick up significantly in the coming quarters. "Neither, in the short term, do we expect them to worsen," he said.

Microsoft did not give a specific earnings or sales forecast for the current quarter, which runs through the end of September.

"There are some signs that we have at least seen the worst," Liddell said. He said that the company saw several businesses stabilize, when compared to the prior quarter. Liddell noted that it saw unit increases in both Windows and Windows Server for the first time in a year, though revenue has continued to slide, with Netbooks making up 11 percent of PC units.

Search revenue was flat compared to last year, despite the launch of Bing.com during the quarter, Microsoft said. However, the company said it has seen a double digit increase in unique users.

On the PC side, Liddell said there is an opportunity for improvement next year, both from possible higher PC sales in general, and perhaps from business PC growth starting to outpace consumer PC growth. This year, consumer PC spending has been stronger than business, resulting in lower average selling prices for Windows--a trend exacerbated by the growth of Netbooks, for which Microsoft typically gets even less revenue.

As for the server unit, the company could see better sales next year, but he said corporate technology purchases will have to pick up for that to happen.

"Macro conditions are going to continue to trump everything," Liddell said. "IT spending is the key."

Liddell noted that several analysts are predicting that server spending may have reached bottom, but will stay in the same range for the next couple of quarters.

"That's internally consistent with the way we see things as well," he said.

Asked about Google's Chrome OS announcement, Liddell struck largely the same tone that Bill Gates did in his interview with CNET News.

"We've been fighting the free OS...for some time," Liddell said. While people do want to surf the Web, he said most people also want to run applications. "We don't see that significantly changing just because of Chrome OS coming out," Liddell said.