Microsoft chief executive Steve Ballmer has said that the company is lowering its revenue forecast for the current quarter and the remainder of the year, because the overall economic situation has worsened, further impacting PC demand.
But while the software giant's short-term financial results are likely to be affected by the current economic environment, he described Microsoft's long-term outlook for both the company and the industry as "bullish".
In a memo sent to employees last week, Ballmer outlined seven business priorities for the company, which include Windows, productivity, enterprise servers and tools, MSN, small business applications, devices and the .Net platform. He noted that each of the seven has the potential for great growth.
Ballmer explained that Microsoft must do three things to navigate the transition: "Have a razor-sharp focus on executing priorities, eliminate unnecessary costs and continue to focus on our people."
"I expect us to reduce planned expenditures very significantly both in the short term and over the longer term," Ballmer wrote. "These efforts alone have the potential to save us tens of millions of dollars a year. Resource reductions don't translate into employee layoffs."
He also wrote that Windows 2000 and the .Net family of servers are compelling products that respond well to customer needs, and that next year the company will launch two of the most important and potentially profitable products ever - Whistler and Office 10.
Ballmer also disclosed a new version of Microsoft's SQL Server database product, code-named Yukon, that he said would be "key to our next-generation storage database file system, email and user interface work".
But despite the announcements, Ballmer said that "the law of large numbers makes it difficult to expand Windows and Office as fast as Microsoft has in the past, since both franchises are already so dominant".
He also said that "Bill [Gates] and the board" believe "it is within our power to grow profits significantly over the next five years. This is the key to stock price appreciation, as the dotcom stock market bubble bust has reminded us."
Rob Enderle, an analyst at Giga Information, said: "This is a fairly unique event. I don't recall a memo like this going out from the chief executive before. I think this is a first."
He added that because the forecast for revenues is not good, Microsoft needs to show it can dramatically decrease expenses. If it does not achieve this, "its stock will be chasing eToys in the basement", he said.
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