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Microsoft shares hit 11-year low

CEO Steve Ballmer's failure to announce more cost-cutting measures disappoints analysts and apparently investors, too. (From Reuters)

Microsoft's failure to announce more cost cuts sent its shares to an 11-year low on Tuesday.

The company's shares closed at $17.17 on Tuesday after dropping to the 11-year low of $16.36 earlier in the day.

Chief Executive Steve Ballmer, who spoke at an analysts meeting in New York on Tuesday, did announce that Microsoft will offer robust versions of its yet-to-be-released Windows 7 operating software for Netbooks, as the company looks to boost revenue from these hot-selling, low-cost computers.

But Microsoft shares fell after Ballmer quashed the hopes of some investors for accelerated cost cuts. Microsoft had announced plans last month to lay off 5,000 workers as part of a plan to save $1.5 billion in annual costs.

"I don't think it makes sense for us to come back and say, 'Could we take out another $2 billion in costs?'" Ballmer said at the meeting.

Microsoft's stock performance
Credit: Yahoo
Microsoft's stock performance since the mid-1990s.

Avian Securities analyst Jeff Gaggin said that investors were disappointed with Ballmer's decision to hold off on further cost-cutting measures and that Ballmer chose not to reassure them that the board will maintain the company's current dividend.

"There was a lot left to interpretation," Gaggin said.

Microsoft, which a month ago blamed Netbooks for weaker-than-expected quarterly profits, said it is planning to ship a low-end version of Windows 7 for Netbooks, and make it easy for people to upgrade to more expensive editions.

"We will have high market share on Netbooks," Ballmer said as he painted a grim outlook for the economy.

"I often think of this as an economic reset. It's not a recession from which you recover," he added.

Ballmer also said he still wants to team up with Yahoo to compete against Internet search giant Google, though he is not interested in buying Yahoo.

He said he hopes to discuss a possible search partnership with Yahoo CEO Carol Bartz and added that he expects Google to start competing with the Windows operating system by offering a version of its Android operating system for laptop computers.

Google launched Android last year as an operating system for smart phones.

Cross Research analyst Richard Williams estimates that Microsoft gets about $35 for each Netbook sold with Windows.