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In early March , Steve Ballmer took a shot at rival Google by telling Stanford students the company was a “one trick pony”; that search advertising was the only venture they knew how to make money at.  It’s a charge that’s been leveled at Googlers more than once.   Whether it proves true or not in the long term, there’s nothing wrong with being a specialist.  A one trick pony can make for a great business; a multi-billion dollar one in Google’s case.  On the other hand, if you’re going to be a one trick pony, operating in a market with a questionable long term future can pose a serious problem once growth plateaus.

That’s the issue Blockbuster’s CEO Jim Keyes faced when he came on board to run the movie rental shop last year.  Not only had the company suffered from mismanagement and corporate bloat in prior years, but it was also facing serious competition (both direct and indirect assaults) over a changing market. 

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Nintendo dominated March gaming sales in the US retail market.  According to NPD numbers, they had the best selling console (the Wii) , the best selling portable (the DS) and even the months top selling software title.  Given that across the board strength, and following months of industry leading sales, it’s no surprise, the financials for the past few months were looking good too.  The question some are asking is: can it keep up and what’s next.

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Adding to what has already been a crowded and busy earnings week, Microsoft announced their 3rd quarter results to the waiting market on Thursday.  In most categories, the results were sufficiently positive to meet or exceed expectations.  Guidance for the quarter ending in June was mixed.

Net income for Q3 came in at $4.4b or 47 cents s share on revenue of $14.45 billion.  Last year, for the same period, Microsoft earned 50 cents a share but that number was inflated thanks to onetime gains resulting from coupon programs that were aimed at addressing concerns caused by Vista and Office 2007 shipping delays.  Taking into account the onetime benefits, the year to year results were very similar.  

For the current quarter, the consensus expectation among analysts was earnings of 44cents a share on revenue of $14.5billion.  The actual was enough to beat between one forecast and fall just short on the other.

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Apple and CFO Peter Oppenheimer have a history of being conservative with their guidance.  Listen to a conference call, or read a transcript and you’ll hear repeated remarks about forecasts the company can “confidently meet.”  It’s like a lawyer that won’t ask a question in court without first knowing the answer; similarly Apple seems incapable of making a projection without being sure it will come true.

The history tracks back quarter after quarter.  In summer 2007, when Apple issued third quarter guidance, they forecast dramatically decreased margins and profits as a consequence of a then ambiguous product launch.  It was going to be costly, they said.  Earnings as a result, they told analysts, could be as low as 65cents a share; well below the trend line.  When the actual numbers came in Apple reported  $1.01/share. Last quarter, the first of their fiscal 2008 was more of the same.  Conservative guidance from Q4 ’07 was trumped with record results but then the next round of forward guidance was received like a doomsday projection.

By now one would think the markets would be used to it.  It’s an obvious enough pattern: first Apple gives conservative guidance about future earnings.  The economy, a product shift, a parts shortage…something, warrants more caution.  Next, the numbers come: conservative projections are blown away by stellar earnings that probably shouldn’t have been a surprise.  Then, lest expectations get too lofty, the upside of the stellar earnings is tempered with another round of conservative guidance.  It’s the Apple M.O., the “Oppenheimer effect”:  Apple’s way of under promising, over delivering then under promising again.

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Today was Yahoo’s big test, their SAT, their GRE, their LSAT.  All were waiting to see how they’d fare. Would earnings be stellar? Would they be average?  How were cash flows? What was the state of the display ad business?

With Google’s numbers already out, Yahoo’s Q1 earnings were on call to be the second benchmark to measure the Internet ad economy. With Microsoft’s takeover offer pending, the numbers were also set to provide a scorecard against which to measure the bid.  Too low? Too high?  Just right?

Turns out, in the test, Yahoo earned a nice comfortable B…a passing grade, good, not bad, better than average but not great either.  

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If at first you don’t succeed, try again.  If that second effort doesn’t work, than take more time and go for trial number three.  There’s usually little wrong with taking the time to get a project right assuming you have the resources and luxury of time.  On the other hand, as the famous quotation goes, “real artists ship.”  If you’ve made a deadline, if you’re fighting for marketshare with competition, repeatedly missing the schedule you set yourself raises troubling questions about management and product development.

Tuesday, Sony’s gaming division put itself in the hot seat by announcing they will postpone the launch of their PS3 virtual world environment (called Sony “Home”) at least until the fall.

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It has been the case time and again in recent memory: Wall Street is less about “what you’ve done for me lately” than about “what you plan to do for me next.”  That was a lesson served anew today to Netflix which reported decent earnings after the close of markets but disappointed with their forward projections.

After building positive momentum in recent quarters, the movie rental service reported Q1 earnings of $13.4 million or (21 cents a share) on revenue of $326.2million.  Less stock compensation related charges, the winter quarter would have yielded 23 cents a share.   Those results were a reasonable increase over earnings of $9.9 million (14c/share) on revenue of $305.3 million for the same period a year ago.

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