Microsoft net income tumbles over 30%; are layoffs ahead?

For the company's fiscal third quarter ended on March 31, Microsoft on Thursday is unveiling some highly unattractive numbers, including a net-income drop of 32% and an EPS decline of 30%, to 33 cents per share (in GAAP earnings; non-GAAP earnings weighed in at 39 cents/share, precisely as had been predicted). Revenues for the quarter were $13.65 billion, a decrease year-to-year of 6%; net income was up by 3%, to $4.44 billion.

As the company prepped for its 2:30pm EDT phone call, a skim of the earnings-report press release reveals that compared to the third quarter of last year, the Online Services and Entertainment and Devices divisions had a rotten few months, with operating-income losses of $575 million and $31 million respectively. Online Services has a history of bleeding out -- they lost $226 million this time last year -- but the folks who bring you the Xbox 360 and other amusements are normally profitable, showing $106 million in operating income a year ago.

The Client division's not exactly in the red, reporting $3.404 billion in revenue and $2.514 billion in income for the quarter, but that compares to $4.033 billion and $3.115 billion last year. Only the Server and Tools division shows year-to-year improvement, reporting $3.467 billion in revenue and $1.344 billion in income for the quarter. Consolidated numbers for all divisions were $13.648 billion in revenue and $4.438 billion in income.

Considering those numbers, it's easy to understand why the great question winging around Seattle today is layoffs, how many?. Rumors aren't proof anything's going to happen, of course, and the numbers one hears batted around in conversations with Redmond folk vary radically (though most seem to have four figures).

Still, in a week that opened with Sun and Oracle's new mind-meld and included Apple's best-ever non-holiday quarter, these are interesting times for The House That BillG Built. We'll have the details as the call unfolds.