“Microsoft on Thursday reported quarterly earnings that edged past analysts’ estimates.”
San Francisco — Microsoft Corp. may possibly be struggling to buy Yahoo, thwarted investors expecting stellar earnings on Thursday, whose shares fell 5 percent in after-hours trade, also pressed its attack on takeover target Yahoo Inc., but revenue came in slightly below-target profit forecast, which overshadowed a strong outlook for next year.
“On the positive side, the company’s profit forecast for coming year is higher than some analysts were projecting.”
The software maker said that its profits slipped to 4.38 billion dollars in the first three months of the year despite revenues rising slightly to 14.45 billion dollars. That compares to analysts’ projection of 44 cents per share, on revenue of $14.5 billion, according to Thomson Reuters.
The results include a tax benefit and detracting from the US software giant’s profits was 1.42 billion paid for a fine by the European Commission in an antitrust case against the maker of the ubiquitous Windows operating system that essentially offset one another.
Chief Financial Officer Chris Liddell acknowledged a weak U.S. economy, nevertheless said a hold up in its domestic market had not hindered Microsoft’s diverse set of businesses, which bring in more than 60 percent of its revenue from overseas.
“We are being cautious just like everybody else,” Liddell said in an interview. He also stated that quarterly Windows revenue missed company anticipations due partly to an inventory build-up of computers and a lack of progress in the company’s ongoing battle against piracy.
Microsoft’s core desktop personal computer software, data center software and video game businesses all reported strong performances. Its online business, where Microsoft chases far behind the Internet search and advertising giant, Google, remains a problem. The online business, while strategically important to Microsoft’s future, is overshadowed in size by the company’s mature software divisions.
“Our third-quarter results demonstrate the benefit of our diversified business model,” Liddell said in a statement. “Our broad span across geographies, product categories and customer segments is a tremendous asset and supports our outlook for double-digit revenue, operating income and earnings per share growth for this fiscal year and also for fiscal year 2009.”
On Wednesday, Steven A. Ballmer, Microsoft’s chief executive, indicated that the company did not plan to increase its original bid of $44.6 billion for Yahoo, and held out the possibility that Microsoft might drop its bid, if Yahoo’s management continues to spurn its offer.
“We are prepared to go forward without a merger.” Ballmer said at a conference in Milan. His comment, most analysts say, is probably a gesture intended to put more pressure on Yahoo’s board. Microsoft did walk away from one high-profile takeover bid in the past, a $2-billion offer for Intuit, the personal finance software maker. But that was 13 years ago, and Microsoft folded only after the Justice Department challenged the planned purchase.
Microsoft has options for establishing the online business without Yahoo, together with other investments and partnerships, Liddell said on a conference call. Talks between the two companies were characterized by “unrealistic expectations of value,” and have been “anything but speedy,” he said.
“Yahoo continues to lose search share and profit continues to decline year on year,” Liddell said on the call. “We have been clear that speed is of the essence for the deal to make sense.”
Yahoo CEO Jerry Yang turned down Microsoft’s advances, rejecting the $31-a-share bid and approaching rivals such as Time Warner Inc.’s AOL. Ballmer may begin a proxy contest to oust Sunnyvale, California-based Yahoo’s board as soon as this weekend.
The acquisition, which would be the largest in Microsoft’s history, may help the company take a bigger chunk of the $41 billion market for Internet ads away from Google.