On Thursday, software giant Microsoft reported its first year-over-year quarterly revenue and profit falls since it went public 23 years ago, in 1986.
In its fiscal third quarter, which ended March 31st, Microsoft said its revenue fell 6% to $13.65 billion, from $14.45 billion. It reported net income of $2.98 billion, or 33 cents a share - - a 32% drop from the $4.39 billion, or 47 cents a share, reported in the period last year.
The financial results, included $290 million of severance charges related to the previously announced plan to reduce up to 5,000 positions and $420 million of impairments to investments. Combined, these two charges reduced earnings per share by $0.06.
Revenue in Client, Microsoft Business Division, and Server & Tools was negatively impacted by weakness in the global PC and Server markets. Revenue from enterprise customers remained stable during the quarter.
Four of Microsoft's five business divisions recorded lower sales, including a 16% drop in its key Windows business to $3.4 billion. PC shipments fell by 6.5% in the first three months of the year, according to research firm Gartner.
Microsoft's operating losses from the online services division more than doubled to $575 million, signalling continuing problems in battling web search giant Google.
The firm is also facing a challenge from netbooks, the inexpensive laptop computers that are the only sector of the PC business enjoying growth. Microsoft has not been able to charge as much for the versions of Windows that are generally bundled with netbooks as it can for bigger PCs.
“With our continued R&D investment and our broad suite of products and services, we remain in a great position to compete and gain share in the marketplace,”said Kevin Turner, chief operating officer at Microsoft.
During the quarter, Microsoft released the beta version of the Windows 7 operating system, which remains on track for a fiscal year 2010 launch. The company said development milestones were achieved on other products including Microsoft Office 2010, Windows Server 2008 R2 and Windows Mobile.
“While market conditions remained weak during the quarter, I was pleased with the organization’s ability to offset revenue pressures with the swift implementation of cost-savings initiatives,”said Chris Liddell, chief financial officer at Microsoft. “We expect the weakness to continue through at least the next quarter.”
Microsoft offered updated operating expense guidance of $26.7 billion to $26.9 billion, including severance charges, for the full year ending June 30, 2009.
