Microsoft Sees Ad Growth, Shrugs at Yahoo

Microsoft will get along in the online ad space, with or without Yahoo under its wings. That was one message conveyed in this afternoon’s earnings call with investors. The company’s Q1 results pleased analysts, though its net profit fell to $4.39 billion.

“With or without a Yahoo acquisition, Microsoft is focused on the online advertising market,” said SVP and CFO Chris Liddell, mirroring comments made earlier this week by Microsoft’s CEO Steve Ballmer.

Microsoft reported $843 million in revenue from its Online Services division in the quarter ending March 31, up 40 percent from the $603 million collected the same quarter 2007. The $843 million included revenue derived through its aQuantive acquisition.

Online ad dollars were also up quarter over quarter, and the firm predicted online services revenues will grow 37 to 41 percent next quarter.

Liddell expressed impatience with Yahoo’s resistance to Microsoft’s $44.6 billion acquisition bid for Yahoo, made in February. “Speed is of the essence for the deal,” he said. “Unfortunately, the transaction has been anything but speedy.”

Microsoft will “remain disciplined” in its stern approach to the proposed acquisition, he said, denying Yahoo’s stance that the original bid undervalues Yahoo’s worth. Liddell pointed to Yahoo’s decreasing search market share, suggesting its contention that Microsoft’s offer should be higher “simply” because the software giant can afford it “is not one that I favor.”

Liddell hinted an announcement regarding the Yahoo bid will come next week, and suggested the company would consider withdrawing its proposal.

Regarding its less embattled aQuantive acquisition, Liddell said 96 publishers have switched over to using the ad tech firm’s Atlas ad management system since Microsoft took over. He suggested staff integration is humming along, and noted “all key” executives at aQuantive have remained with the firm since the deal closed in August 2007. “We’ve integrated, in my view, the cultures very well,” he said.

Microsoft reported Q3 operating income and diluted earnings per share of $14.45 billion. It took in $13.4 billion in net income in the first three quarters of its ’08 fiscal year, compared to $11 billion for fiscal 2007. The company expects earnings per share growth of around 35 percent by the end of this fiscal year.