Microsoft announces first ever drop in sales

Microsoft has released its third quarter financial results for the period ending 31 March, announcing revenues of US$13.65bn (£9.34bn) – six per cent down on the same period last year.

The quarter marks the software giant’s first ever drop in revenue, as the ongoing recession takes its toll on its core PC market.

Microsoft said profit had fallen by 32 per cent to US$2.98bn (£2.04bn), when compared to the previous year.

Microsoft said its Client, Microsoft Business Division, and Server & Tools divisions had been particularly badly affected by the global drop in PC sales, but added that revenue from enterprise customers had remained stable during the quarter.

A recent Gartner report showed worldwide PC shipments totaled 67 million units in the first quarter of 2009, nearly seven per cent down on the first quarter of 2008.

Microsoft saw client sales fall to US$3.4bn (£2.3bn) from US$4bn (£2.7bn) a year ago, while the Microsoft Business Division suffered a drop in revenue to US$4.5bn (£3.1bn) from US$4.7bn (£3.2) a year ago. Microsoft’s online service division also saw sales shrink, from US$843m (£577m) in 2008 to US$721m (£493m).

In a webcast announcing the results, Microsoft senior vice president and chief financial officer, Chris Liddell, said that emerging markets had been impacted in particular and demand had decreased by as much as 20 per cent.

Liddell added that Microsoft continued to have some “pockets of strength”, such as in netbook and Xbox sales. He added that these are products that reflect “consumers’ desire to purchase down the price point”.

Liddell said while he was not happy with the results, he was pleased with the company’s “relevant performance”.

“We managed expenses significantly below our expectations going into the quarter, which is a credit to our employees' ability to adapt to a new reality,” he explained. “Despite all the distractions, including the first significant layoffs the company has ever implemented, we executed on our product development milestone.”

The financial quarter was the worst Microsoft has experienced since becoming a public company in 1986.