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Microsoft suffers first ever year-to-year revenue drop

Latest update : 2009-04-24

Microsoft suffered its first ever year-to-year drop in revenue, posting $13.65 billion for the quarter ending March, compared with $14.45 billion in the same quarter last year. The software giant's recent quarter profits plunged 32% to $2.98 billion.

AFP - Microsoft on Thursday reported that its recent-quarter profits slid 32 percent to 2.98 billion dollars as bleak economic conditions caused an unprecedented erosion of its revenues.
Microsoft said its revenue for the quarter ending the last day of March was 13.65 billion dollars compared with revenue of 14.45 billion dollars in the same quarter last year.
Net income for the quarter was 33 cents per share, a 32 percent drop from the 47 cents per share, or 4.39 billion dollars, in the same three months in 2008.
"We expect the weakness to continue through at least the next quarter," said Microsoft chief financial officer Chris Liddell, warning the current three-month period is expected to be rocky for the software colossus.
Microsoft's fiscal year ends with the current quarter.
Thursday's report shows that while the US company's revenue for the past nine months is ahead of what it was during that period the prior year, profit is lagging by nearly two billion dollars.
Microsoft said that revenue in its Client, Business, and Server & Tools units suffered due to weak global server and personal computer markets.
"It is pretty bad across the board," said analyst Matt Rosoff of private firm Directions On Microsoft, which tracks the Washington State-based technology firm.
"They were down in almost every business segment. I don't think they surprised Wall Street; there were some folks expecting the news to be even worse."
The price of Microsoft stock climbed more than three percent to 19.56 dollars in after-hours trading that followed release of the earnings report.
The company reported that the recent quarter's expenses included 290 million dollars in severance charges stemming from a previously announced plan to cut as many as 5,000 jobs.
Microsoft said it remains on track to release its next-generation operating system, Windows 7, in 2010.
Microsoft's earnings report signals that the firm has yet to break its dependence on sales of software for business and home computers, according to Rosoff.
A bright spot in the quarterly results was that sales of Microsoft's Xbox 360 videogame consoles remained ahead of those of PlayStation 3 consoles made by Japanese rival Sony.
"Microsoft is so broad and deep, but still so dependent on the PC desktop," Rosoff said. "Microsoft was hoping they would be able to diversify beyond its core business of server software. It just didn't get there fast enough."
The year-over-year drop in revenue reported in the quarter was a first for Microsoft since it was founded in 1975.
"This was the most difficult economic environment our company has faced," Liddell said during a conference call with analysts and reporters.
Microsoft said the overall personal computer hardware market deteriorated while sales improved of inexpensive "netbooks," small laptop machines designed to do little more than access the Internet.
The firm's revenue plummeted in markets such as Eastern Europe, Brazil, and Japan where performance was strong a year earlier, according to Microsoft.
"We remain more cautious than most about the world economy," Liddell said.
"Economic pressures are both broad and deep. While we would all like to believe a recovery will be quick and painless, we think it will be slow and painful."
Microsoft intends to reach its goal of trimming 5,000 jobs by July of 2010.
Liddell said Microsoft will not delay bringing new products to market and that it believes long-term outlooks for the technology sector and the company remain strong.
"I didn't see any improvement at the end of the quarter to make me think we are at a bottom and will be coming out of it," Liddell said of the status of the global computer market.
"During the quarter, it stopped getting worse but that is different from it started getting better."

Date created : 2009-04-24