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Increased piracy hurt Microsoft's quarter

The software maker, which had been making gains in the number of unlicensed PCs, saw that trend reverse in the March quarter, a Microsoft executive tells CNET

For several quarters, Microsoft has been seeing a drop in piracy rates, which has been helping fuel improved business in its Windows unit. In the just-reported March quarter, however, Microsoft saw an increased rate of piracy, an executive told CNET on Thursday.

Microsoft's Colleen Healy
Colleen Healy, Microsoft's general manager of investor relations Microsoft

In an interview, Colleen Healy, Microsoft's general manager of investor relations, said that the number of unlicensed PCs, particularly in Asia, increased during the company's third quarter. That was one of the factors that caused the Windows unit to come in shy of what the company had forecast.

"Q3 was a tough quarter on the unlicensed front," Healy said. "We had been making gains there for the past several quarters."

Overall, Healy said the PC market came up about a percentage point shy of Microsoft's growth forecast.

"We saw the PC market take a different mix," Healy said. "Emerging markets on the PC hardware came in a little stronger; mature markets came in a little weaker."

Weakness in the Windows unit and the Microsoft Business Division, which includes Office, was offset by higher-than-expected sales in the Entertainment and Devices unit, which includes Xbox, Healy said.

Healy said that the company expected the piracy reduction trend to return in the current period, the company's fourth quarter, which runs through June.

She also said that Microsoft continues to see a strong market for software, despite rumblings about the economy.

"When we look at the envirnonment, IT and software spending continues to look healthy," she said. "From where we sit, the economy is looking good from an IT and software spending standpoint."