Microsoft Financial Analyst Meeting: Chris Liddell, Ray Ozzie

Rob Enderle

In this fourth segment of the series, I'll cover what was said by Microsoft's CFO and during the Executive Question and Answer Period that came at the end of the main program.

 

Chris Liddell CFO

 

Chris started out by pointing out that his Investment Advisory council's advice allowed Microsoft to weather the market downturn with little or no impact. This is an audience made up of financial analysts who likely didn't protect their own customers that well. I wonder if that didn't have a certain "in your face" aspect to it. I also wished Microsoft licensed out its investment advisors' advice.

 

He then showcased share price and how it fell sharply from last year at this time but has been up solidly for the last six months, largely driven by Windows 7 and Bing excitement. Looking forward, he is setting economic expectations that are lower than traditional growth rates because of the drag the economy is placing on all of the tech properties. He then went into detail on how Microsoft was going to contain costs and assure the strength of the balance sheet.

 

He explained why the company actually borrowed money, which was because the rates were so low that Microsoft couldn't pass up the deal and wanted to increase liquidity. It got over $3 billion at interest rates that were between 1% and 2.3%, depending on method. I should use their bank.


 

He pointed out that over the last year, and during his tenure, products are actually coming out on time and feature complete, which had not been the track record previously. Over the next year, Microsoft will have the best suite of products it has ever had and most of today was focused on looking at each one.

 

There was a large emphasis on the whopping $9 billion it continues to invest annually in R&D. Throughout, he outlined this idea of "the New Normal" and finished by providing a brief rehash of how executives were positioning the company in this new economic environment.

 

Overall, this was likely the best CFO presentation I've ever seen. It was interesting and engaging, and I didn't doze off once during it. (Typically, CFO presentations put me to sleep). He came off as competent and confident -- two things critical in a good CFO.

 

Ending Q&A Ray Ozzie

 

The event ended with a Q&A and Ray Ozzie came up on stage. Here, Steve Ballmer got a darker, brooding, almost angry look, which may be because he was tired but also may have been because he was angered by the hard questions that the audience was asking. They may have implied, to him, that folks hadn't been listening. Ray Ozzie was on his game and spoke to the deep integration going on across the company, with core Microsoft technologies giving Microsoft economy of scale for its size.

 

It is interesting to recall that at Lotus, Ray was the star and he generally got a standing ovation from the Notes and Lotus fans. Here, he is a supporting player for the team even though he has Bill Gates' old job as Chief Software Architect. I actually think Ray prefers this lower-profile role, as he never really seemed to enjoy the star status when he had it.

 

There was an interesting heated moment when an analyst said he had spoken to a number of Microsoft employees who had said Microsoft's problem historically was overspending budgets. Ballmer got upset and said this simply was not true, however, the response from Liddell indicated that budgets are either too large or that divisions are cutting competitively (against each other), which could be putting vendors out of business or choking operating groups because they are overcutting. Ideally, you want accurate, reasonable budgets. Good management is setting reasonable budgets that are met, not blowing out budgets in either direction. After this exchange, I thought it likely that Microsoft was overcutting, and if that's true, execution could begin to suffer before year's end.

 

Watching the interaction on stage, it was clear that Kevin and Steve were the closest, Ozzie wanted into the family, Liddell was comfortable with whatever relationship he had, and Lu was not really part of the group and it seemed to bother him. I wondered if this last was cultural.

 

At the end, Steve was smiling and gregarious again and clearly back on his mark.



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