Microsoft CFO: Recovery “Will Be Slow And Gradual”

With significant drops in quarterly net income and revenue, Microsoft (NSDQ: MSFT) CFO Chris Liddell said during the company’s earnings call Thursday he could “not be happy” with the company’s results. But he said that the company was pleased with its efforts to cut costs. “We managed expenses significantly below expectations,” he said, noting that the company had decreased its headcount by 800 during the quarter and that employees were focused “on efficiency and need for fiscal discipline.”

Going ahead, Liddell said the company remained cautious on its outlook. “We remain more cautious than most about the state of the world economy,” he said. “While we’d all like to think the recovery will be soon and painless, we believe it will be slow and gradual.”

Liddell said that the company had not seen an improvement in conditions at the end of its quarter — although they did not get worse.

He said that some economists were expecting a recovery in 2010 but it was “too soon to call.” In the meantime, Liddell said the company would continue to watch costs closely. He updated the company’s cost guidance, stating that the company expected to save an additional $1 billion on top of the $1.5 billion cut in costs that it announced in January.

More highlights after the jump:

Online: Executives said that while online advertising revenue had dropped, they emphasized there had been continued growth in page views and the number of search queries. Going ahead, the company said it expected that “monetization rates will remain under pressure.”

Entertainment and Devices: Executives said that console sales were up by 15 percent during the quarter. Software attach rates were up to 8.3 percent, while accessory attach rates increased to 3.9 percent. But next quarter, Liddell said the company believed console revenue would decline because of its earlier Xbox price cuts.

Other divisions: Deteriorating macroeconomic conditions continue to hit demand for PCs and hardware, Liddell said. But he said annuity revenue was holding up.

New products: Microsoft is set to release new products across most of its businesses over the next year, including its next operating system (Windows 7), a new version of Office, and a new search product. Liddell did not give any details about possible release dates for any of them. He said, however, that all of the products would be launching into a weak economic environment. “We think that’s the right thing to do,” he said. “Once we get the economic pickup, we think we’ll outperform.”

Hiring: The company did not announce any additional layoffs, as some had expected. Liddell said that the company would continue to hire both American and foreign workers, albeit at a low rate. He added that the company’s hiring so far had been “even slower than it had expected.” Microsoft has said that while it will eliminate 5,000 jobs, it will hire up to 3,000 employees in key areas, such as search.

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