Microsoft posted a quarterly profit and outlook below Wall Street expectations last night, citing "tough" economic conditions, and its shares fell 6 per cent.
The software maker, which is locked in an on-again, off-again pursuit of Yahoo, said its current-quarter forecast factors in difficult economic conditions continuing for the remainder of 2008 before some improvement in the first half of 2009.
"It's what I would describe as a tough environment. It's clear other companies around us are suffering," Microsoft Chief Financial Officer Chris Liddell said in an interview with Reuters. "It hasn't hurt us significantly."
However, for the current quarter, Microsoft forecast earnings per share to range from 47 cents to 48 cents on revenue between $14.7 billion and $14.9 billion, below Wall Street forecasts on average of 50 cents per share in earnings on $15.06 billion in revenue, according to Reuters Estimates.
The world's largest software maker has weathered a soft US economy by ramping up sales to emerging markets and offering a diverse set of products aimed at corporate customers and consumers.
Andy Miedler, analyst at Edward Jones, said Microsoft is not immune from the challenging economic conditions and that it was reasonable for the company to scale down its forecasts. Particularly hard-hit by the weak US economy, according to Liddell, is online advertising, a business in which Microsoft is already trailing rival Google.
The search leader also reported quarterly earnings on Thursday, saying its online advertising business has held up well despite weak economic conditions. It reported a weaker-than-expected 35 percent rise in quarterly profit.
Microsoft sees an acquisition of part or all of Yahoo as a way to strengthen its position in the advertising business.
The company confirmed details of its latest proposal, revealed earlier this week by investor Carl Icahn, to buy the web company's search business. The proposal included $19.5 billion to $26.5 billion in revenue guarantees over 10 years.
"We clearly continue to believe that our proposal is a compelling one," Liddell said on a conference call with analysts.
Microsoft, based in Redmond, Washington, also said it plans to invest an additional $500 million in its online strategy.
Reuters