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Microsoft investors seek answers about strategy

Microsoft Corp investors said they're hoping for a closer look at the biggest software maker's strategy for reducing costs and coping with slowing customer spending at an all-day analyst meeting scheduled for yesterday.

Microsoft said last week that the slowdown will cause sales and earnings to be less than expected this quarter. Between 350 and 400 analysts and investors will attend Microsoft's meeting to get more details.

"I'm looking for some more substance as to how the management team is going to operate in this difficult information-technology environment," said Christian Koch, an analyst with Atlanta-based Trusco Capital Management, which holds Microsoft shares. "I hope they say they'll get a little more aggressive on their cost structure."

During the meeting, top executives such as Chairman Bill Gates, CEO Steve Ballmer and CFO John Connors, as well as the heads of its various product groups, will brief the financial community on its strategy, priorities and new technology for the coming year. The company declined to provide details on specific topics.

David Brady, who helps manage the Liberty Growth Stock Fund, will watch the conference via the Web. He said he wants to hear the company reaffirm that the next version of Windows and the company's first game console are ready to hit stores on time for their respective October and November release dates.

The success of both products depend heavily on Christmas season sales, analysts said. Last month a federal appeals court overturned a breakup of the company while ruling that Microsoft illegally defended its Windows monopoly.

With the threat of a breakup removed, investors say they are more focused on evaluating the company's plans for the future. At the center of those efforts is the company's .Net strategy to sell software and services that exchange information between normally incompatible personal computers, Web sites, programs and devices such as cellphones.

The strategy is key to growth because the company currently gets two-thirds of its sales from software for PCs, a market that's slowed as PC sales declined last quarter for the first time since 1986.

Microsoft said last week that sales and profit for its fiscal first quarter will fall short of forecasts as PC sales drop and as it struggles to convince companies to upgrade to new software.

Microsoft forecast earnings of US$0.39 to US$0.40 a share. The consensus forecast of analysts surveyed by First Call/Thomson Financial was US$0.45.

Brady said he'll listen for further details of the strategy and how Microsoft will make money, an area where Microsoft has so far provided little information.

"We all have to get a better understanding of what the endgame is for that," he said.
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