The weak economy continued to take a sharp toll on Microsoft (NSDQ: MSFT), as the company once again reported big declines in revenue and net income. Revenue dropped 17 percent, while net income fell 29 percent. Microsoft missed analysts’ lowered estimates for both earnings per share and revenue. None of Microsoft’s five business units posted larger revenues or profits and the company’s stock immediately started to drop in after-hours trading.
Some small consolation for Microsoft watchers: With Microsoft’s next operating system, Windows 7, now released to manufacturing and due to hit store shelves in late October, results at least at the company’s flagship Windows division should start improving soon.
For its fiscal year ended June 31, Microsoft’s revenue dropped 3 percent — marking the first time in the company’s history that annual sales had fallen.
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Online services: Microsoft’s online services division posted a 14 percent drop in revenue to $731 million during the quarter — which was in line with most analysts’ expectations. The unit’s losses widened to $732 million from $485 million during the same period a year ago.
Entertainment and devices: The division posted a 25 percent drop in revenue, much greater than analysts had expected and steeper than the 2 percent decline reported during the first quarter. Entertainment and devices also posted its second consecutive quarterly loss; this time, of $130 million.
Other businesses: The PC market may be stabilizing — there was actually a 4 percent increase in PC shipments between the first and second quarters, according to Goldman Sachs — but that did not mean that the company’s PC dependent units posted any gains. Microsoft’s business division — which sells Office — saw a 15 percent drop in sales, while its Windows division posted a 28 percent drop.
Outlook: For the third straight quarter, Microsoft did not provide any specific guidance for the coming quarter, although it did say that it expected operating expenses of between $26.6 billion and $26.9 billion for the next year. That was in line with analysts’ expectations.