Business | Technology
Microsoft gets ready for a tough slog
Company says it will delay plans to construct a $500m data centre in West Des Moines, Iowa.
- Bloomberg
- Published: 23:40 January 24, 2009
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Seattle: Microsoft chief financial officer Chris Liddell predicts a slow recovery for the world's largest software maker, the technology industry and the economy.
"We are not planning and sitting here and expecting there is a going to be a bounce," Liddell said. "The reality is that this is very broad-based. I think people are now only coming to grips with what that means."
Microsoft announced plans on Thursday to fire as many as 5,000 workers, the first companywide job cuts in the Redmond, Washington-based software maker's 34-year history. Because of the length and unpredictability of the slowdown, Liddell suspended financial forecasts for at least the rest of the fiscal year, which ends in June.
Net income declined 11 per cent to $4.17 billion, or 47 cents a share, missing a company forecast for profit of as much as 53 cents. Sales rose 1.6 per cent to $16.6 billion.
Microsoft rose nine cents to $17.20 at 4pm New York time on Friday in Nasdaq Stock Market trading. The shares plummeted 12 per cent, the biggest drop since November 2000.
The company cut more in areas where growth prospects are several years away or smaller, Liddell said. Those include online services outside the US, he said.
Microsoft also will delay plans to construct a $500 million data centre in West Des Moines, Iowa, the company said in a blog posting.
Areas where the company is projecting significant growth, such as internet search, mobile-device software and web-based programs, will continue to get more investment and personnel, he said.
Personal-computer shipments rose at the slowest pace in six years last quarter, researcher Gartner said this month. The PC market will be the same, or weaker, for the rest of Microsoft's fiscal year, Liddell said.
"Our model is not for a quick rebound," chief executive Steve Ballmer said in an unusual appearance on Microsoft's earnings conference call with analysts. "Our model is things go down and they reset. The economy shrinks and then it doesn't rebound, it builds from a lower base."
The outlook signals increasing pressure on the top PC sellers, Hewlett-Packard and Dell, said Maynard Um, an analyst at UBS AG in New York. The two companies, which report earnings next month, may fall short of analysts' estimates, he said in a note.
Microsoft avoided job cuts in the previous slowdown, and sales held up better than those of rivals such as Oracle and Apple.
This time, Apple's sales are growing faster, and Oracle's profit and forecast met analysts' estimates last quarter.
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