A Year of Change Ahead for Microsoft in 2009
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For Microsoft, in many respects, 2009 promises to be much like 2008. The company has all the same challenges it exited 2008 with lingering legal issues, efforts to test and ship the latest version of Windows, and the continued development and evolution of its "cloud computing" plans. Did we mention the down economy?
'Vista Capable' or 'Vista Culpable?'
If CEO Steve Ballmer had thought the company could put the majority of its legal entanglements behind it in 2008, he was wrong.
Lawsuits and legal tussles will continue to plague Microsoft in the new year most notably the so-called "Vista Capable" lawsuit that's currently slated to go to trial on April 13.
The case is built on the question of whether Microsoft's promotion of less powerful PCs as "capable" of running Windows Vista before Vista shipped in 2007 was actually a deceptive business practice meant to spur holiday computer sales in 2006, even though those PCs could only run the simplest edition of Vista.
Since many of those PCs could only run Vista Home Basic edition, they could not display Vista's new Aero Glass user interface. The plaintiffs insist Aero Glass is a major feature of Vista, and therefore insist that customers who bought PCs thinking they were truly "Vista capable" had been tricked because without the graphics it wasn't really Vista. Microsoft's lawyers, of course, strongly disagree.
Although discovery ended in late 2008, additional phases of the trial, such as motions, could draw it out further into 2009 or even later. Additionally, if Microsoft loses the class action suit, appeals could drag out well beyond the useful lives of those "Vista incapable" PCs.
Buddy, Can You Spare a Dime?
In one respect, 2009 will be unlike any previous year for the company as it and the rest of the technology industry has to cope with staying on track in what is arguably the worst down economy since the Microsoft's founding 33 years ago.
One guarantee is that, while executives insist the company is still growing in revenues, in building new infrastructure, and in headcount, those plans have been growing more slowly than before the recession.
At Microsoft's annual meeting in late November, executives told shareholders that, while it will cut budgets across the board, the company will continue hiring albeit at a "much" reduced rated. The latter statement may belie an earlier rumor of a hiring freeze. Microsoft will also continue to invest in research and development, even if at a decreased rate.
Additionally, executives said they had already reduced operational expenses by $500 million.
Officials said in October, during the company's conference call with financial analysts for its first fiscal quarter of 2009, that they are slowing the growth of capital spending, particularly in the area of datacenters needed to support Microsoft's future cloud computing plans.
In addition, the company tried to scale back shareholders' expectations when it reported its fiscal first quarter 2009 earnings in late October. At that point, officials downsized fiscal 2009 revenue guidance from between $67.3 and $68.1 billion its guidance in late July -- to between $64.9 and $66.4 billion. That's a decrease in anticipated revenues during fiscal 2009 of $1.7 to $2.4 billion.
While the company lowered its growth predictions for the current year, however, it continued at least as late as the annual meeting in November to predict year over year growth. In fiscal 2008, it grossed $60.4 billion. That's a slowdown from the 18 percent year over year growth it reported for fiscal 2007, but in these tough times, the 7 percent growth that the company's financial planners predicted in October still seems bullish.
One positive for Microsoft the company still has $25 billion in the bank enough to bail out the Big Three automakers on its own in the unlikely event it wanted to.
Next page: Windows 7 is Coming