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In a not-totally surprising -- yet still kind of striking -- turn of events, Microsoft is reporting that its sales have fallen for the first time in 23 year. You read that right, 23 years. According to numbers that the company has just released, sales fell 6 percent year-over-year, while overall net income dropped a staggering 32 percent. Those numbers are significant, but what's more telling is where those losses are coming from. Namely? Netbooks. Apparently, in the midst of a global downturn consumers really are buying cheaper, especially when it comes to tech, which puts a fairly significant crunch on Redmond's bottom line. A CNN reports suggests that the the presence of Linux on those devices has contributed to the hurt here, but it's more likely the combo of a market still unwelcoming to Vista and the wide popularity of XP on the low-power systems has more to do with these dipping profit margins. Oh, and that general, awful market depression. Still, it should serve as some kind of wake up call to Microsoft that just being the biggest might not be enough to keep it afloat during the crisis we're in the midst of. Hey Windows 7 -- no pressure, right?
According to a press release, Microsoft’s net income fell 32 percent to $2.98 billion, or 33 cents per share, in its third quarter ended March 31. Quarterly revenue stood at $13.56 billion, a 6 percent drop compared to revenues in Q3FY08.
Microsoft has said weakness in the global PC market negatively impacted its results. Experts are also putting a lot of the blame on the growing netbook market. With the economy the way it is, a significant amount of people are turning to budget laptops or netbooks for their basic computing needs. While Microsoft recently boasted that 96 percent of new netbooks run Windows, it’s not exactly the money maker it could be for the company.
A recent report suggested that Microsoft makes in or around $15 on every Windows XP netbook sold. While this still amounts to a tidy profit when you consider XP is an operating system the company is “putting to bed,” it’s no where near what the company would make if everyone went out and bought laptops that came bundled with Vista.
Microsoft plans to cut costs with the its first-ever large-scale job cuts - in January the group announced 5,000 redundancies, including 1,400 immediately. Shares in the group have slumped by 40% in the last 12 months, but were up 3% in after-hours trading on Thursday following an announcement the 2010 release of new product Windows 7 is on track. The group's chief financial officer Chris Liddell said he expected recovery to be slow and gradual. "I didn't see any improvement at the end of the quarter that gives me encouragement that we are at a bottom and coming out of it," he said. Company chief executive Steve Ballmer also said he was still interested in a potential partnership with Yahoo - although Microsoft no longer wants to buy the search engine.
Talks of a huge takeover rumbled on for several months before falling through last year. Microsoft's disappointing figures followed strong results from both Apple and Google this month. Apple reported a 15% increase in profits, while Google's profits rose by 9%.
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