Beyond Binary

Check back here for updates from Microsoft's call with financial analysts following their earnings report. We'll be updating this blog as new information comes to light. You can see how they did here.

3:33 p.m.: That's it for the call. Reflecting back, the two issues that struck me the most were the hard line on Yahoo and the piracy issue. I'll have more to say on both fronts in the next little bit.

3:31 p.m.: Finally, an analyst notes that the biggest disappointment in the quarter seemed to be Windows revenue and asks if the mix of Windows XP was a factor.

Liddell says that the Vista versus XP issue did not play into the quarter, and Healy notes that the mix shifted up a bit in favor of Vista from the prior quarter, adding that the company has now sold 140 million Vista licenses to date.

"I think things are tracking well and as expected from that perspective," Healy says.

3:24 p.m.: There's more discussion about piracy and the PC growth forecast. Liddell is pressed on how the company remains sure that it will see this quarter's piracy trend not continue into future quarters. Liddell notes that there were some unique factors in China this quarter and says that, for the year, Microsoft believes its Windows units will grow 12 percent to 14 percent as compared to overall PC unit growth of 11 percent to 13 percent, reflecting a percentage point or two of piracy gains.

3:17 p.m.: For piracy, Liddell says the company expects to see modest gains into its next fiscal year. "We still think it is a positive trend overall," he says. As for buybacks, he says it would remain "modest" until the company gets more clarity on whether it will be buying Yahoo.

3:15 p.m.: Liddell fields questions on piracy and whether the company expects to continue to buy back shares or will hold off until it knows where things are going with Yahoo.

Microsoft CFO Chris Liddell

(Credit: Microsoft)

3:11 p.m.: He reiterates the company's Saturday deadline for Yahoo to come to the negotiating table. "Unless we make progress with Yahoo by this weekend, we will reconsider our options." He adds that those options include taking an offer directly to Yahoo shareholders or walking away from Yahoo shareholders and spending that money on other investments or trying to grow Microsoft's own business.

With that, Liddell moves on to questions from analysts.

3:09 p.m.: Liddell says that Yahoo's reaction has been characterized by "unrealistic expectations" and that Microsoft intends to remain disciplined. He says that the best reason he's heard for why Microsoft should up its bid is the fact it can afford to do so, adding that argument "is not one that I favor."

3:07 p.m.: Liddell says the size of Microsoft's initial offer was made in an effort to complete the deal quickly. "We have been clear that speed is of the essence," he says. "Unfortunately, the transaction has been anything but speedy."

3:07 p.m.: As for Yahoo, Liddell starts by saying that Microsoft is focused on the online advertising market "with or without a Yahoo combination."

2:59 p.m.: Liddell again teases the fact that he would address Yahoo later in the call, noting that there are twice as many people as usual on the conference call.

2:58 p.m.: Microsoft shifts to its outlook. CFO Liddell notes that the company is forecasting "software spending mixed, but positive overall on a global basis." He says the company is cautious on the U.S. economy, but adds that as far as any economic worries are concerned, Microsoft has "not seen any significant spillover to our business."

2:52 p.m.: In the online services area, Healy says that Microsoft saw search queries and page views up during the quarter, and says that the number of individual IDs for one of Microsoft's Live services grew 18 percent in the quarter, to end at 448 million. She addresses the elephant in the room, saying Liddell would have more to say about Yahoo later in the call.

2:49 p.m.: Healy addresses the Windows division, noting that sales were affected by PC growth rates that were a couple of percentage points lower than expected in mature markets, partly offset by the fact that emerging markets grew one percentage point higher than forecast in January.

Colleen Healy, Microsoft's general manager of investor relations

(Credit: Microsoft)

As she noted in an interview with CNET News.com, Healy says that the company saw higher piracy in the quarter, which also dented sales and earnings in the Windows unit.

"Piracy is a tough battle and an area where we will need to continue investing," Healy says.

2:47 p.m.: The company's "unearned revenue," was roughly flat from the prior quarter at $12.1 billion, consistent with the typical seasonal pattern, says Colleen Healy, Microsoft's general manager of investor relations. The balance of sales contracted but not billed increased during the quarter, to finish above $11.5 billion, Healy says.

2:46 p.m.: In addition to Microsoft's reported results, company watchers keep a close eye on sales taken in for future quarters, which show up in several line items on Microsoft's balance sheet.

2:41 p.m.: While Office and Windows were strong in the prior two quarters, Liddell says the March quarter was buoyed by strength in the unit that includes the Xbox 360. He notes that the company's outlook for the current quarter continues to be strong. "We expect a strong finish to what has been an excellent year," he said.

2:40 p.m.: Chief Financial Officer Chris Liddell notes that the company's diversification helps the company in different economic markets

2:34 p.m.: The call is starting with usual disclaimers and prepared remarks.

2:30 p.m. PDT: The hold music sounds like the cartoons before an old drive-in (to date myself).

The NCAA this week announced a formal program limiting how often bloggers with media credentials can update their blog while attending championship college events.

The sports governing body set blogging limits for each sport. For example, those at football games can update their blogs three times per quarter and once at halftime. For basketball, bloggers can post five times per half, once at halftime and twice per overtime period.

The policy even sets rules for water polo (three per quarter, once at halftime), bowling (10 blog posts per session) and fencing (10 per session).

The move is already garnering the predicted outrage. It reminds me of the music industry trying to hold on desperately to old business models in a fundamentally new era.

This isn't the first time the NCAA has butted heads with the blogosphere. In June, a sportswriter from the Louisville, Ky. Courier-Journal was ejected from a college baseball game for, you guessed it, blogging. Indeed, I'm sure there are folks at the NCAA that see its latest efforts as a reasoned compromise, but I think it just shows how out of touch they are.

If I were the NCAA and there was someone passionate enough to deliver a blow-by-blow account of a college fencing match, I'd want to encourage that, maybe even buy them a non-alcoholic beer.

For those who want to check out the guidelines for themselves, the rules are posted in a PDF file on the NCAA's Web site.