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Google is being cautious.  Apple is being prudent .  Now, another bellwether earnings announcement and more of the same. Thursday, Microsoft reported decent earnings but cut forward guidance amidst prevalent fears about the economy and uncertainty in how to predict its impact in the coming months.

Net income for the first quarter in Microsoft’s fiscal year came in at $4.373b, or 48 cents a share (diluted), up 2% from $4.289b (45cents/share) for the same period last year.  Revenue was up 9 percent to $15.06b.

The results were in line with Microsoft’s July guidance which forecast EPS of 47 to 48 cents a share and slightly ahead of analysts whose consensus estimate (Thomson Reuters) was 47 cents a share on revenues of $14.8b.

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Layoffs.  Write-offs.  Weak Guidance. Turbulent Times. Uncertainty.  Foggy Futures. Cracked crystal balls.  Caution. Concern.  

In recent weeks, bad financial news has been like a mosquito you know is there but can’t swat.  It’s been a constant, inescapable drone to a market fearful and in need of reassurance; a market in need of Napoleon’s kind of leader.

Tuesday, though Steve Jobs doesn’t typically participate in earnings calls, Apple’s chief made a rare exception to try and offer just such reassurance.  About fifteen minutes in the conference call, he took the helm stating, “Against the backdrop of this global economic slowdown, it seemed a good time to make a few remarks.”

Together with CFO Peter Oppenheimer and COO, Tim Cook, Jobs helped deliver news that was at once both positive and, looking forward, prudently conservative. Click to Read More

Two weeks ago, Netflix provided a window into upcoming earnings with a pre-announcement to reset expectations for the reality of the current economy.  Today, the official results debuted.  New subscriber additions, as the company warned, were weak but net income was up thirty percent.

Reported net income was $20.4m or 33 cents a share for the third quarter, up from 15.7m (23c/share) for the same period last year. Revenues were in at $341m.

Analysts polled by Thomson Reuters had a consensus estimate of 31cents a share from revenue of $343m. 

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In July, the results failed to meet high expectations.  Now, its October, expectations were low and the results exceeded them.  Such is the sometimes awkward reality of predicting the performance of a company that refuses to give much in the way of forward guidance.

Thursday, Google reported third quarter results. They return showed sequential growth is decelerating, but overall the performance was more than enough to best expectations. Net income of $1.35b or $4.24 a share, good enough to best last year’s result of $1.07b (3.38/share) for the same period by 26%. Revenues were also up handsomely to $5.54b from $4.23b last year.   

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When conditions are stable and sentiment calm, it’s relatively simple to look backward on recent performance to make educated guesses on near term trends.   But when things start to change suddenly and systematically? Then the prediction game is altogether different.  What advertisers were spending three or six months ago, for example, offers little insight into what they’ll spend three months from now.   

In July, thirteen of the top twenty five Internet advisers by media value were classified as financial services companies (via TNS Media Intelligence).  Where we are today is a different place.  The old rules don’t apply.  Many of the big financial companies that were buying up internet ad real estate are gone; bought out, sold out or shut down.  Those that remain may or may not pick up spending to fill the void. One theory says they will – a rush to reassure the market and address consumer fears.  Another theory says they’ll hoard cash, control non-critical spending and remain cautious.

Around the entire advertising world, online and off, nobody is certain how much of a pullback there might be. Click to Read More

Entertainment industries are sometimes called recession proof.  When wallets tighten, retirement gets pushed back, or bills go unpaid, people will spend a little to escape fear and worry.  There’s a need for entertainment in tough times, the theory goes.   The reality is less forgiving: entertainment like anything else can fall victim to a weakening economy.  Entertainment industries are recession resistant not recession proof.   Glimpses of August data may be beginning to prove that point. 

Mirroring a surprise shortfall in August gaming sales, Netflix came out Monday with a surprise adjustment for their third and fourth quarter guidance.  A few weeks ahead of the actual earnings report (October 20th), the Los  Gatos company preannounced that third quarter revenue and EPS will fall within prior guidance but subscriber numbers will fall “just below” the low end of guidance.

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Research in Motion (RIM) is expected to launch three new phones in the coming months: the Blackberry Bold (new to the US, already available internationally), a clamshell phone called the Pearl Flip, and a touch screen device expected to be called “The Storm (pics).”  Unfortunately, new product launches – between component parts, subsidized pricing and promotional costs – can be expensive.  As a result, the company warned late Thursday that gross margins and profit will suffer in the third quarter.

Co-CEO Jim Balsillie characterized the situation as a “land grab” and justified the increase in near term expense as, essentially, an opportunity.  It’s similar to the story pitched in June when the company showed sales and marketing expense up heavily.  But the market didn’t treat that first glimpse as foreshadowing,  and they weren’t convinced with the re-itteration.  The market also wasn’t completely satisfied with the rest of RIM’s earnings news.

By midday Friday, the stock was trading near $70 a share, well below its fifty week low of $80.20.  From Thursday’s market close of $97.53, it was down more than 25%.

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