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Microsoft Beats Street, Tempers Expectations

We've been saying for a while now on that the economic downturn that is wrecking finance, insurance, real estate and a bunch of other industries seems to have only dealt a glancing blow to technology. And with Microsoft announcing earnings today, we got an idea of just how hard tech's getting hit.

It seems as though we've pretty much been right thus far. If Microsoft is any indication -- and we feel safe in saying that it is -- the current economic storm is knocking over a few trees in tech but not ripping roofs off of businesses or tossing cars around. Microsoft's numbers for its first fiscal quarter of 2009 beat Wall Street's expectations and reflected a solid trend upward, generally speaking.

Of course, these are the summer numbers we're talking about here -- June through August -- and the real winds of the downturn only started to seriously gust in September and October. Those are the winds that are going to do a bit more damage, so Microsoft is preparing the Street for lower-than-expected numbers for fiscal Q2 and 2009. This MarketWatch (great site, by the way, if for some odd reason you don't know it) article has the details:

"For its current quarter ending in December, Microsoft said it expects earnings between 51 cents and 53 cents a share, and between $17.3 billion and $17.8 billion in revenue. Analysts have been estimating the company would post earnings of 55 cents a share in the period and $17.9 billion in revenue.

"For the full year, Microsoft said it expects earnings between $2 and $2.10 a share, and revenue between $64.9 billion and $66.4 billion. Analysts have been estimating the company would report earnings of $2.12 a share and $66.6 billion in revenue for the year, according to FactSet."

Apparently, financial analysts and other observers are cool with that forecast and were expecting something like it. It reflects a mild pull-back from expectations but nothing shocking -- which seems totally reasonable to us and obviously seemed reasonable to more learned observers, as well. As we type, Microsoft's stock is up in after-hours trading.

So, while the not-so-good news is that technology isn't immune to the effects of the downturn, the much better news is that it doesn't seem poised for anything remotely close to investment-bank-style total collapse -- at least judging from what Microsoft is telling us. And while that shouldn't come as a surprise to anybody -- after all the current crisis has its origins in different industries -- a little positive news in an uncertain time is always welcome.

Posted by Lee Pender on October 23, 2008