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Microsoft says PC, server business still weak

In announcing its quarterly financial results, the software maker said cost cuts helped balance the still-weak economy.

Ina Fried
2 min read

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 June 30, the company earned $3.05 billion, or 34 cents per share, on revenue of $13.1 billion. 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 4 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.
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. Microsoft

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

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

Investors were not pleased. In after-hours trading, Microsoft's stock dropped 7 percent, or $1.90, to $23.66.

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 5 percent to 7 percent.

On the cost front, it said it reduced expenses by $800 million more than the low-end of its plans. It also recorded $108 million 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 finalized on Wednesday and is due to go on sale October 22.

Here's a look at the how each business unit did, by the numbers.