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When Steve Ballmer threatened to take the Yahoo deal off the table, that could have been with an eye on the company's woeful financial performance, just announced for their third quarter.

I've been on the freefalling Tower of Terror in Disney World, where gleeful Imagineers yank you down thirteen stories faster than gravity could do, because it's more fun that way. Microsoft shareholders endured a similar ride when the tech company reported the awful truth about their Q3 2008 financials today.

Plummeting operating income, down 33.1 percent. Net income, lowers by 11 percent. Revenues were fantastic, a record $14.45 billion for the quarter. So what happened?

Look across the Big Pond, at our friends in Europe, says Ballmer and company. La belle dame sans merci indeed.

"Operating income and earnings per share results included a charge of $1.42 billion, or $0.15 per share, for the European Commission fine," Microsoft said in its announcement. Microsoft received that fine for failing to live up to the Commission's perceptions of what they should be doing in making technical information available to third-party developers.

Microsoft enjoyed a bright spot at its troubled Entertainment division, where repairing defective Xbox 360 consoles suffering from the Red Ring of Death. Revenue for the division rose 68 percent year over year in the quarter, with cumulative console sales passing 19 million during that period.

After hours activity showed some mild negative sentiment by investors. At press time, shares of Microsoft were down 4.65 percent to $30.32. As Silicon Alley Insider noted, the numbers will make it a little more difficult for Microsoft to close the Yahoo takeover without kicking in more cash or stock to increase the value of the bid.