Home / World Business
Sat, Jul 25, 2009 - Page 10 News List

Microsoft’s quarterly profit falls 29% on soft PC sales

FIRST REVENUE DECLINE: The company’s CFO says it is in a stronger position than it was a year ago and did well in the fourth quarter, but challenges lie ahead

AP , SEATTLE

Microsoft Corp said on Thursday its profit in the last quarter plunged 29 percent because of weak computer sales, ending a fiscal year in which the software maker’s revenue fell for the first time since the company went public in 1986.

Microsoft’s revenue in the quarter was well short of analysts’ expectations, and its shares skated down US$2, or 7.8 percent, to US$23.56 in after-hours trading.

Before the earnings report the stock had gained 3.1 percent to close at US$25.56.

The results reflect how Microsoft’s fortunes are tied to the PC industry, which is expected to sell fewer computers this year than last — the first such decline since 2001. Many buyers are holding on to their existing machines for longer than usual to save money in the recession.

Among consumers, the hottest segment of the PC market is in low-cost “netbooks,” which run Windows XP — a lower-profit product for Microsoft.

“It was not a great quarter at all,” Canaccord Adams analyst Peter Misek said. “‘Wow,’ was the response I had when I saw it hit the tape.”

Microsoft’s earnings in the last quarter, which ended June 30, sank to US$3.05 billion, or US$0.34 per share. In the same period last year it earned US$4.3 billion, US$0.46 per share. The company’s quarterly sales dropped 17 percent to US$13.1 billion.

For fiscal year 2009, which ended on June 30, the company’s profit fell 17 percent to US$14.6 billion, or US$1.62 per share, from US$17.7 billion, or US$1.87 per share, in the previous year. Sales sank 3 percent to US$58.4 billion.

In a conference call with analysts, chief financial officer Chris Liddell said Microsoft did well in the fourth quarter, given the economy.

“We are a stronger company than we were a year ago,” Liddell said. “However, the economy continues to be challenging and we need to lift our game to another level in fiscal 2010.”

In the three months that ended June 30, divisions responsible for Windows, Office and server software, posted sales declines, as did Xbox 360 and Web ad groups.

Big businesses renewed software license agreements at about the same rate as in the past, Liddell said. But revenue wasn’t growing at historic rates because many firms have frozen hiring or cut workers, so they aren’t increasing the number of software licenses they buy.

Corporate customers also bought fewer server computers.

Over the last few quarters, Liddell said, Microsoft “felt we couldn’t necessarily see the bottom. I think that at least we are seeing signs now of the bottom.”

The rest of the calendar year, at least, will remain tough, he said.

Microsoft’s online ad business widened its operating loss. The Entertainment and Devices group also ended the quarter in the red.

This story has been viewed 1144 times.
TOP top