Like Google and Yahoo before them, Microsoft believes the worst of the economic crisis is behind it.
In reporting strong earnings today, Microsoft said its Online Services division showed some positive signs during the quarter. Those signs include a growth in page views and a slowing in the decline of advertising rates, according to Bill Koefoed, Microsoft’s GM of investor relations.
The company hailed developments in search, citing market share growth in each month. Third party reports also show that Bing is gaining ground, and two agencies, SearchIgnite and Efficient Frontier, reported sequential increases in their clients’ search spending overall, and in spending on Bing in particular.
Microsoft still expects the proposed dealwith Yahoo, announced in July, will close early in 2010, according to CFO Chris Liddell. Once it does, Microsoft is planning for $100 million to $200 million in integration costs for the year, with no revenue contributions at least through Microsoft’s fiscal year, which ends in July. In the future, revenue from the deal could be in the “hundreds of millions” range, though Liddell declined to give specific guidance.
The online services division brought in $490 million in revenue, down 5.8 percent from $520 million in last year’s first quarter and down 9.3 percent from the previous quarter’s $540 million. Liddell online ad revenue specifically declined by 3 percent, while U.S. search revenue was up “mid-single digits” quarter-to-quarter.
Microsoft’s overall revenue and net income were down year-over-year, but not as much as analysts had expected.
According to Liddell, the quarter that ended on September 30 could represent “the bottom of the economic reset.” That sentiment has been put forth by both Google and Yahoo in the past week, as they also announced earnings that were more positive than anticipated.
Revenue was mainly driven by demand for Microsoft’s Windows 7, which launched this week, and its Xbox gaming console, Liddell said. The company also cut costs considerably during the quarter, lowering its operating expenses by 6.9 percent across the board.