Microsoft shares surge up; investors welcome cost cutting measures

Cost-cutting saves Microsoft stock after rough 3Q

SEATTLE — Shares of Microsoft Corp. jumped more than 10 percent Friday, the first trading session since the software maker said sinking personal computer shipments pushed sales and earnings down significantly from a year ago. Redmond-based Microsoft makes most of its profit from selling the Windows operating system and business software such as Office. With PC shipments down about 7 percent in the first three months of the year, there was little the world’s largest software maker could do to improve returns in the quarter.

For the three months that ended March 31, Microsoft’s profit fell 32 percent to $2.98 billion, or 33 cents per share. In the same quarter of 2008, Microsoft earned $4.39 billion, or 47 cents per share.

Sales slipped 6 percent to $13.6 billion, missing analysts’ expectations for $14.1 billion and marking the first decline in revenue from the prior year in Microsoft’s 23 years as a public company.

The one thing the software maker could do was control costs. In January, the company announced it would lay off 5,000 workers within 18 months, the first companywide job cuts in Microsoft history. It also said it would trim travel costs, freeze wages, scale back a campus expansion and cut spending on contractors and vendors.

Microsoft said Thursday it cut fiscal third-quarter operating expenses even more deeply than anticipated, and trimmed its operating expense guidance for the full fiscal year, which ends in June, by about $1 billion to a range of $26.7 billion to $26.9 billion.

“The fact that we have been able to achieve operating expense savings in excess of that is really a credit to people implementing them in an even more extreme fashion,” said Chief Financial Officer Chris Liddell in a conference call Thursday. “So they had traveled even less than what we have asked them to. They have taken vendor cost savings even more than what we have asked them. And we have ramped headcount even slower than what we were anticipating.”

Investors latched on to that bit of brightness in an otherwise grim quarterly report. Microsoft’s stock jumped $1.99, or 10.5 percent, to close at $20.91 Friday.

The last time Microsoft’s shares moved more than 10 percent was Jan. 22, when the stock plunged almost 12 percent to close at $17.11.