Microsoft disappoints and suggests dropping Yahoo bid

Despite the hype in some articles - see "Microsoft 2009 outlook rosy" from AP - I thought Microsoft's Q1 results fully justified the 5% fall in their share price in after hours trading. Microsoft profits fell 11% to $4.39b on flat revenues of $14.45b. Indeed, Microsoft did not split out the results in constant currency. If they had I'm pretty sure we would have seen a revenue decline. It was Microsoft's Windows division 'whot done it for them' with revenues down 24% at $4.02b. I still have considerable doubts over Vista which is just not getting the corporate takeup expected. When forced to when purchasing new PCs, customers buy the Vista licences but run XP. Ballmer has hinted that XP's life might be extended. Some customers might bypass Vista all together.

Interestingly Microsoft queried the strong PC sales figures from IDC recently (12% increase in volume in Q1) - saying that their own calculations showed fewer PCs shipped than expected.

Sales in the Office division were also down 2%. This was offset by a 68% revenue rise in the XBox division and an 18% increase in the Server division.

I was also interested in the comments made by Microsoft's CFO Chris Liddell on the Yahoo bid saying "Unless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives. These alternatives clearly include taking an offer to Yahoo shareholders or to withdraw our proposal and focus on other opportunities". That second option is entirely in line with my 'advice' to Microsoft right from the start...ie "Don't do it".