During a conference call on last year’s second-quarter results, Microsoft’s Chief Executive Steve Ballmer told analysts that the present economic conditions represent a truly once in a lifetime scenario and that because the economy is resetting to a lower level, significant changes will have to happen inside the company and not only there.
He explained that there are no clues on how long will this situation last, as the economy might keep the present trend "a year, two years—I don't know what it will be—and then start to build back."
The company’s sales figures for the second quarter reflect the worrying conditions, with the sales rising by just two percent to $16.63 billion - analysts forecasted a total of $17 billion, which was already considered extremely low, so the actual sales came as a big hit for the company. As expected, the net income fell 11 percent to $4.17 billion and Microsoft’s officials stated that they lack the clarity needed to forward a forecast for the next two quarters.
In order to successfully make it through, Ballmer said that "We're significantly putting the brakes on," referring to the recently implemented strategy that includes the layoff of about 5,000 of the company’s workers - number which represents 5.5 percent of its total 91,000 person workforce. Other measures included in the plan are the cut on travel expenses by 20 percent and also the elimination of merit bonuses for the year that starts in August.
The biggest problem is the diminishing demand for PCs, which begins to show in sales numbers - the registered fall is of 8 percent, taking the revenue down to $3.98 billion, even though the company announced three months ago that by January it was expecting a growth of at least 10 percent.
Still, there are some areas where Microsoft is going strong. One of them is the division that develops software for server computers, used for running Web sites and corporate networks, which grew 14 percent to $3.7 billion. Another one is Microsoft’s Entertainment & Devices business, which managed to sell 6 million units of its Xbox console and posting profit for its second straight quarter. The competition in the industry is extremely tough, and Microsoft announced that it sold more than double the units of Sony’s PlayStation 3 console.
One of the main focuses at this point is the development of the next generation of Windows, Windows 7, which is expected to come out next year. An early test version is already available, as the company is looking to gather as much feedback as possible. The OS represents one of Microsoft’s tickets to a safer financial area, as the two outperforming divisions mentioned above are far from sufficient.
Another division getting ready to step up its game is the one dealing with mobile devices. Cell phone users will soon be able to enjoy the upgraded Windows Mobile software. "We'll be having a series of major announcements over the next 18 months," says Andy Lees, senior vice-president for Microsoft's Mobile Communications Business.
