Brod said the company will also lower marketing expenses; capital expenditures, "especially in our data centers"; and make general savings in areas such as travel and vendors.

But the investment spigot won't be shut completely.

"We're trying to balance margin preservation with the need to invest in future opportunities," Brod said. "Our results today will be influenced by the current economic conditions, but our future results are going to be influenced by our current investments, so we're very cognizant of the fact that we need to continue to invest to grow."

Q1 performance. Microsoft escaped the first quarter, ended Sept. 30, largely unscathed.

Revenue was $15.06 billion, up 9 percent from a year ago and ahead of both Microsoft's most optimistic July forecast and the consensus estimate of Wall Street analysts.

Operating income of $6 billion and earnings per share of 48 cents were both at the high-end of management's guidance. The EPS figure also beat the Wall Street consensus by a penny.

"Considering all that's going on in the marketplace, I think we're quite proud of the performance that we had, because we did exceed our own guidance in a number of instances," Brod said. "Three of our divisions exceeded their guidance. Our operating income and earnings per share met the high end of our guidance and was actually higher than what the Street was expecting."

Outlook. Brod said Microsoft cut "a few percentage points" from its full-year forecasts, but indicated that it's a tough estimate to make.

"As we looked across the marketplace, obviously there's a lot of turmoil going on and a lot of uncertainty, so this was probably one of the more difficult times we had in projecting what the future would be," he said.

The company had predicted PC shipment growth, one of the most important drivers of Microsoft's sales, of 12 to 14 percent for its fiscal year. Despite better-than-expected shipments in the last quarter, as reported by analyst firms Gartner and IDC, Brod said Microsoft did see "some falloff in the last few weeks of September."

The company is lowering its PC forecast for the year to the 8 to 12 percent range, Brod said.

"We also hear reports that IT spending at corporates may be cut back a couple of percentage points. We're seeing some of the server unit projections going down a few percentage points. As we look across all those factors, we brought our guidance down to $2 to $2.10 per share," Brod said.

Some analysts expected Microsoft to hold the line on profits by trimming expenses and buying back stock, both of which Brod said are in the works. But on a percentage basis, Microsoft is actually lowering its profit forecast by 3.7 to 5.7 percent, while its sales forecasts are only down 2.5 to 3.6 percent.

"Our investment income was near zero and with all the things going on in the marketplace -- you know all the market declines -- obviously have an impact on our ability to generate income from our financial assets," Brod said. "We're not projecting anything much in that all year."

The company had a cash and short-term investment stockpile of $20.7 billion on Sept. 30.

Buybacks. Brod said Microsoft bought back more than $6 billion of its shares in the quarter. Its stock has tumbled along with broader market. The company's board authorized a $40 billion buyback in September.

"You can see we're fairly aggressive," Brod said. "We look at this share price as an opportunity in that respect."

The company also issued the first debt in its history, $1.975 billion in commercial paper.

After a volatile day in which shares traded as low as $20.89, Microsoft finished the regular session up 80 cents, 3.7 percent, to $22.33, before the earnings figures were released. Early in the extended trading session the company had gained an additional 43 cents to $22.76.