If Microsoft doesn't "make progress" in its Yahoo buyout bid by this weekend, the Redmond company will move on to options that include taking the offer to Yahoo shareholders and dropping the acquisition offer entirely, said Chris Liddell, senior VP and CFO at Microsoft.
Microsoft is focused on the online ad market," due to industry predictions of major growth in this space over the next few years, Liddell told financial analysts and journalists during Microsoft's third quarter financial call.
Accordingly, Microsoft has developed a back-up ad strategy that will revolve around Windows Live and its other existing properties if the Yahoo deal stays stymied, Lidell said during the call, in which Microsoft announced net income of $4.4 billion -- down 11 percent from the same quarter last year -- on sales that rose only slightly this past quarter to $14.5 billion.
Microsoft did post a profit for the quarter, however, due mainly to positive sales results for its Xbox games console and business server software. The big drops came in sales for Windows and Office, but those are largely attributable to a deferral of Vista and Office 2007 revenue until the first quarter of 2007, even though sales began in late 2006.
Taking the deferral out of the equation, the client division that sells Vista still saw sales fall 2 percent from the previous year. Despite a growth in advertising sales, Microsoft's Web division posted a loss of $228 million, a sign that the company needs to make major changes, and may look elsewhere if shunned by Yahoo.
Beyond announcing its quarterly earnings today, Microsoft projected revenues of between $66.9 billion and $68 billion for fiscal 2009, foreseeing continued demand in the server software markets and big gains on both the entertainment and advertising sides.
Microsoft's projected revenues for 2009 were higher than Wall Street expections, as were the company's projected earnings of $2.13 to $2.19 per share for the fiscal year. Liddell said that the projections did not include the impact of any possible acquisition of Yahoo.