Microsoft Stumbles After Revenue Disappoints

Microsoft (NASDAQ: MSFT) reported year-over-year declines in revenues for both its 2009 fiscal year and fourth quarter. While industry observers had been expecting another slide in sales, it was how much the figures were down that caught investors off guard -- with both sets of numbers well below analysts' earlier predictions.

The company said it brought in $13.10 billion in revenue for the fourth quarter, which ended June 30 -- a 17 percent decline from the same period a year ago. Meanwhile, net income came in at $3.05 billion, or $0.34 per share. That constitutes declines 29 percent and 26 percent, respectively, compared to last year.

Before one-time charges, Microsoft posted income of $0.38 per share, two cents ahead of Wall Street expectations, according to Reuters Estimates.

For the entire fiscal year, Microsoft pulled in $58.44 billion in revenue, declining 3 percent from fiscal 2008, down from $60.42 billion last year. Additionally, the company said full-year net income dropped to $14.57 billion, or $1.62 per share -- a decline of 18 percent and 13 percent, respectively.

In the run up to Thursday's earnings announcement, estimates from Thomson Financial had Wall Street expecting full-year revenues at $59.66 billion and earnings per share of $1.70.

As with the third fiscal quarter, analysts were expecting a decrease in both quarterly and annual revenue over the same periods last year.

It was the second straight quarter that Microsoft posted year-to-year revenue declines.

In the third fiscal quarter of 2009, Microsoft brought in $13.65 billion in revenues, a slide of 6 percent from the same period a year earlier. Net income came in at $2.98 billion with earnings totaling $0.33 per share -- which represented declines of 32 percent and 30 percent over the prior year, respectively.

"This is the first year that their overall revenue fell in all five business segments," Matt Rosoff, research vice president for corporate news at Directions on Microsoft, said during a conference call to discuss the company's results.

Company executives said they are doing everything possible to bring down expenses. On a conference call with financial analysts Thursday afternoon, CFO Chris Liddell noted that the company had decreased expenses by $3 billion more than he had predicted earlier in the year.

Liddell also said he expects the economy to begin a serious recovery perhaps as soon as the end of 2009.

"We're still not out of the woods," he said. "I see a difficult economy until the end of this calendar year." Still, he said he remains optimistic about Microsoft's performance: "The company is in my opinion in the best shape that I've ever seen."

Microsoft has taken a number of high-profile moves to cut costs. The company laid off approximately 5,000 employees in the third and fourth quarters as part of a concerted effort to cut expenses -- the first major layoffs in the company's 34-year history.

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