While its crystal ball is no clearer than anyone else's, Microsoft Chief Financial Officer Chris Liddell told financial analysts the company is committed to faring better than the overall IT industry, whatever the economy brings.
The company, in its quarterly earnings report, lowered its growth outlook for the year, but not as much as some had feared. It is now forecasting at least a mild recession, as opposed the economic growth it once saw coming in the second half of its fiscal year.
At the same time, Liddell, in a call with analysts following the earnings report, pointed out that the company may yet see double-digit growth in revenue and per-share earnings for the year.
"We feel extremely good about our relative competitive position," Liddell said.
Microsoft also addressed last quarter's shortfall in the company's Windows Client unit, which posted revenue growth four percentage points lower than the forecast, even though PC unit sales were in line with what the company had projected.
Bill Koefoed, general manager of investor relations, told analysts the issue was that the mix of sales was far from what it had predicted, with traditional PC sales significantly slower, while low-end "netbooks" accounted for a larger share of the market.
On the Xbox front, Microsoft said it sold 2.2 million Xbox 360s as retailers boosted inventory ahead of the holiday season.
Update at 2:50 p.m. PDT
Liddell is talking about Microsoft's approach to the recession, which is to focus on the cost savings it can offer to customers, watch its own costs, and invest for the future.
The company expects to spend less than it had planned in several areas including hiring, marketing, and on the build-out of its data centers. Cuts are also planned in areas like travel and vendor expenses.
Microsoft on Thursday reported first-quarter earnings that narrowly topped estimates, while saying that it expects the holiday season results to be slightly lower than analysts were projecting.
The company lowered its estimates of both PC and server growth by a couple of percentage points, but said it continues to see relatively healthy enterprise demand.
"There are indications out there that business is fairly strong, but there is also concern about what could happen," Chief Accounting Officer Frank Brod told CNET News.
For the quarter that ended September 30, the software maker said it earned $6 billion, or 48 cents per share, on revenue of $15.06 billion. The company had been expected to post per-share earnings of 47 cents per share, on revenue of $14.78 billion, according to Thomson Reuters.
"In spite of all that is going on we had a fairly good quarter," Brod said.
Looking ahead, Microsoft projected December quarterly earnings of 51 cents to 53 cents per share, with revenue in the range of $17.3 billion to $17.8 billion. Microsoft had been expected to post per-share earnings of 55 cents, on revenue of $17.96 billion, according to Thomson Reuters.
Brod also said the company had not seen a big drop-off in long-term contracts. "Our renewal rate on annuity contracts was at our historic levels so we were pleased to see that as well," Brod said.
Microsoft shares inched higher in after-hours trading, changing hands recently at 22.68, up 36 cents or more than 1 percent. That came on top of a 3 percent gain in regular trading.
The company is tempering its hiring plans, but he reiterated no plans for a full-on freeze in new hiring.
"We may see some pauses in select groups," Brod said. "Overall, we will still have growth, although it probably won't be as robust as we talked about just a few months ago."
Brod said that while the company is trying to keep expense growth in check, it also is trying to use the downturn as a chance to build new businesses. He noted that Microsoft invested heavily after the dot-com bust in its Server and Tools business and that unit now generates billions in sales.
"Current business certainly is influenced by current economic conditions but our future growth is influenced on how we currently choose to invest."
He said that the company's acquisition strategy has not really changed and reiterated that the company has no active talks with Yahoo.
As for the individual business units, it was a mixed bag. Among the bright spots was Microsoft's money-losing online unit, which turned in better-than-expected online advertising sales growth of 15 percent.
"We were pleased," Brod said.
Profits in the Windows unit were down year-over-year, despite slight growth in the unit's sales. The company's business division and server and tools unit posted a combined 19 percent sales growth, with double-digit profit growth as well..
The company is shaving its forecast for PC sales, now expecting the holiday quarter will be up 8 percent to 12 percent, as compared to a prior forecast of 12 percent to 15 percent.
"We are still seeing the market growing," Brod said. "That's still close to double digit growth."
Microsoft's server forecast is also coming down a few percentage points, Brod said.
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