Microsoft says no new cost cuts, shares hit 11-year low

By Jim Finkle

BOSTON (Reuters) - Microsoft Corp outlined plans to offset revenue declines as the PC market shifts to low-cost netbooks, but it failed to announce more cost cuts, sending its shares to an 11-year low.

Chief Executive Steve Ballmer told an analysts' meeting in New York on Tuesday that Microsoft will offer robust versions of its yet-to-be-released Windows 7 operating software for netbooks, as the company looks to boost revenue from these hot-selling, low-cost computers.

But Microsoft shares fell more than 3 percent after Ballmer quashed the hopes of some investors for accelerated cost cuts. Microsoft had announced plans to lay off 5,000 workers on January 22 as part of a plan to save $1.5 billion in annual costs.

"I don't think it makes sense for us to come back and say, 'Could we take out another $2 billion in costs?'" Ballmer said at the analysts' meeting.

Avian Securities Jeff Gaggin said investors were disappointed with Ballmer's decision to hold off on further cost cutting measures, and that he chose not to reassure them that the board will maintain the company's current dividend.

"There was a lot left to interpretation," Gaggin said.

Microsoft, which a month ago blamed netbooks for weaker-than-expected quarterly profits, said it is planning to ship a low-end version of Windows 7 for netbooks, and make it easy for users to upgrade to more expensive editions.

"We will have high market share on netbooks," Ballmer said as he painted a grim outlook for the economy.

"I often think of this as an economic reset. It's not a recession from which you recover," he added.

Ballmer also said he still wants to team up with Yahoo Inc to compete against Internet search giant Google Inc, though he is not interested in buying Yahoo.

He said he hopes to discuss a possible search partnership with Yahoo CEO Carol Bartz, and added that he expects Google to start competing with the Windows operating system by offering a version of its Android operating system for laptop computers.

Google launched Android last year as an operating system for smart phones.

NETBOOK TREND

Microsoft had partly blamed last quarter's profit shortfall on a shift in personal computer sales to netbooks from full-featured machines.

Analysts say the low pricing of netbook software is hurting Windows profits, and estimate that Microsoft only reaps about half the revenue from PC makers for each netbook sold, compared to what it earns on sales of more expensive laptops.