Weak PC sales take its toll on Microsoft

Microsoft on Thursday reported weaker-than-expected quarterly revenue and again declined to offer a forecast for the current quarter.

The software maker reported that for the three months ended 30 June, the company earned $3.05bn, or 34 cents per share, on revenue of $13.1bn. However, those results included legal and other charges, as well as the deferral of revenue related to a Windows 7 upgrade program. In total, those charges cut into per-share earnings by four cents.

Revenue from Windows on desktops and laptops has been dropping. However, the decline isn't quite as deep as it looks, because Microsoft deferred some Windows revenue to future quarters to account for an existing program that gives Vista buyers free Windows 7 upgrades.

Analysts had expected per-share earnings of 36 cents, according to First Call. However the revenue figure was notably weaker than the $14.37bn that analysts expected, even accounting for the Windows revenue deferral.

Chris Liddell, chief financial officer at Microsoft, said: "Our business continued to be negatively impacted by weakness in the global PC and server markets. In light of that environment, it was an excellent achievement to deliver over $750m of operational savings compared to the prior year quarter."

In a series of PowerPoint slides released along with its report, the company said the enterprise business remained relatively healthy, but hardware sales were weak. PC sales, in particular, dropped five per cent to seven per cent.

On the cost front, it said it had reduced expenses by $800m more than the low-end of its plans. It also recorded $108m of "impairments" related to a drop in value for some investments.

Although there were some blogs and Twitter posts to the contrary, a Microsoft representative said the company isn't announcing any new job cuts. It did discuss in its earnings report its previously announced program to cut up to 5,000 jobs.

Microsoft didn't give a sales or earnings forecast when it reported its last quarterly numbers in April. It did say it was seeing economic pressures that were both "broad and deep" - the worst in the company's 30-year history.

The results come just as the company wrapped up development of Windows 7, which was officially finalised on Wednesday and is due to go on sale 22 October.

Original article: Microsoft says PC, server business still weak from CNET News.com