Windows 7 Sales 'Fantastic,' Ballmer Says
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BELLEVUE, Wash. -- Despite the fact that Microsoft recently posted its first declines in revenue and earnings in its history, stockholders today at the company's annual shareholder meeting appeared forgiving.
None of the audience harangued the company for not doing better in the current economy, although Microsoft (NASDAQ: MSFT) CEO Steve Ballmer took a defensive stance on the company's performance anyway.
"Our numbers show we're on the right track, driven by strong revenues from the Windows Division and the Xbox 360," he said.
"We've already sold more copies of Windows 7 than we ever have" for any previous version of Windows, Ballmer added.
Besides the usual gathering of investment managers and retirees making their annual pilgrimage here to Bellevue, one suburb over from Redmond where the software giant is headquartered, there were shareholder rights spokespersons and civil activists in attendance, and even a small but vocal shareholders group asking Microsoft's top executives to quit funding benefits for same-sex couples.
Overall, though, few issues rocked the boat in a typically short shareholder meeting.
Still, Ballmer and company did a few tough questions from the audience as to why the company cannot seem to make headway against Apple's iPhone and, as one questioner asked, Google's Android.
"We have greater share [with Windows Mobile] than Android," Ballmer responded, adding, "We're going to keep investing [because] I think we're on the right strategy, investing in what goes into phones."
Ballmer also said the company is spending more on research and development than any other company in the world. "We will invest $9.5 billion [in the current fiscal year] into developing breakthrough technologies," Ballmer said.
The meeting comes as the IT sector in general, and Microsoft in particular, are looking for signs of optimism after a brutal year.
In July, Microsoft reported year-over-year declines in revenues for both its 2009 fiscal year and fourth quarter. While industry observers had been expecting another slide in sales, it was how much the figures were down that caught investors off guard -- with both sets of numbers well below analysts' earlier predictions.
For the entire fiscal year, Microsoft pulled in $58.44 billion in revenue, declining 3 percent from fiscal 2008. Additionally, the company said full-year net income dropped to $14.57 billion, or $1.62 per share -- a decline of 18 percent and 13 percent, respectively.
For the first quarter of fiscal 2010, ended Sept. 30, Microsoft posted $3.57 billion in net income -- a drop of 18 percent from a year ago -- with earnings per share (EPS) totaling $0.40.
For Microsoft, a good deal of recovery centers on expectations for new and upcoming products, like Windows 7, which made its debut only last month.
Ballmer today also highlighted products that are in the pipeline for release during the current 2010 fiscal year, several of which are key products for enterprise customers, including Office 2010, SharePoint 2010, and Exchange 2010.
Additionally, he pointed out that the company announced this week that its Azure cloud computing platform, which it hopes will be a hit with corporate customers, will emerge from beta test at the beginning of January.
In the demo room adjacent to the meeting, Microsoft showcased several recently delivered products, including Windows 7 with Internet Explorer 8, the Bing search engine, and its new Zune HD media player.
Meanwhile, CFO Chris Liddell pointed out that the company maintains its freeze on salaries and continues other cost cutting measures
"We reduced expenses by more than $3 billion over what we'd planned [in fiscal 2009]," Liddell added.
While the company's chairman and largest single stockholder, Bill Gates, joined Ballmer and other executives on stage, he didn't say a word during the proceedings.
While shareholders largely let Microsoft off the hook over its performance in recent quarters, the event wasn't without a bit of controversy in another area.
For instance, pastor Ken Hutcherson, an outspoken anti-gay activist, backed a shareholder proposal to have Microsoft publish on its Web site the names of anyone who makes $5,000 or more in corporate charitable contributions, ostensibly to help conservatives identify who contributes to causes they find offensive.
"I have challenged Microsoft for many years to evaluate your charitable contributions, having given millions of dollars to homosexual groups," Hutcherson told the audience.
Only 4 percent of the company's outstanding shares were voted in favor of the shareholder proposal, and it was turned away.