• Business Week, Friday, April 24, 2009 11:15 AM

In a call with Wall Street analysts, Microsoft CFO Chris Liddell sounded "downright morose," Peter Burrows reports -- the latest in a string of indications that the company is being battered by the economy, netbooks, Apple and its difficulty to crack new markets such as smartphones, TV systems, and online search and advertising.

"We remain more cautious than most," Liddell said. "While we'd all like to hope that the recovery will be short and painless, we unfortunately think it will be slow and difficult."

At the same time, Burrows writes, Microsoft is taking pains to deal with its new reality. CEO Steve Ballmer hopes to revive growth with new products such as its new OS, Windows 7, which may come in time for the back-to-school shopping season; a new version of its Windows Mobile software for smartphones, and a new version of Microsoft Office, the flagship product in its very profitable productivity-software business. It is also expected to launch a new version of its Internet search service in coming months.

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