Microsoft CEO Offers Cautious Guidance for 2009

During an hour-long presentation to Wall Street on Tuesday, Microsoft CEO Steve Ballmer provided a strategic update about his company and its expectation for what is turning out to be a pretty tough year. They aren't hugely positive. Ballmer expects the bad times to continue at least through the second half of next year, a period of time he referred to as an "economic reset."

"You don't beat it, you manage in this environment," he said. "You think of it as a reset that might take several years to really reset, and then we need to really think about 'What do we invest in?' You've got to ask 'What is the business reset that goes with the economic reset?'"

Ballmer said that Microsoft was positioned to ride out the reset and he doesn't expect any more job cuts than the 5,000 that were previously announced (1400 of which were consummated in January). During Ballmer's stay in New York, Microsoft stock hit an 11-year low briefly, dropping to $16.36 before rebounding a bit. But he is still bullish about the company's long-term prospects and plans to spend $9.5 billion on R&D this year in a bid to out-innovate the downturn.

That said, he didn't discuss any previously unrevealed new products. Windows 7 is still on track, he said, and is widely expected to ship publicly in the third quarter of 2009. Office 14, the next version of the company's popular office productivity suite, won't ship until next year, Ballmer said. He briefly discussed a low-priced version of Windows Server 2008 R2, called Foundation Server, which will ship this year. (This was first reported on the SuperSite for Windows in December 2008.) Also due in 2009 is Windows Azure, Microsoft's cloud computing OS option.

Microsoft's other businesses are a mixed bag. Windows Mobile is "somewhat unprofitable" and facing strong new competition in the consumer market. It's Internet search and advertising business is an industry joke, and Ballmer agrees that the company is "up against incredible odds;" he says Microsoft is in it for the long haul, however. And entertainment and TV, responsible for the Xbox 360 and Zune, is only barely profitable but represents a huge opportunity for Microsoft. He intimated that the future of the Zune was its software running on non-Zune devices, such as the Xbox 360, mobile phones, and PC.

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