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Microsoft Profits Down First Time in 23 Years

By - Source: Tom's Hardware US | B 14 comments
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Microsoft yesterday reported the company’s quarterly (Q3FY09) earnings, marking the first dip in sales the Redmond company has experienced in 23 years.

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.

The launch of Windows 7 should give the company a jump start in that respect, however, we wouldn’t bank on potential netbook owners being thrilled at the idea of Windows 7 Starter. Microsoft says this version is optimized for netbooks but with the ability to run just three applications at a time, we don’t think people will appreciate Microsoft restricting the number of things they can do at once.

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  • 6 Hide
    FlayerSlayer , April 24, 2009 4:16 PM
    Office 2007 isn't loved like 2003 was, Vista isn't loved like XP, Windows 7 is making more people wait to upgrade, and even in server environments, 2003 R2 is still the reliable standard over 2008. They're failing right now, which combined with the global recession and the trend towards smaller ultra-portables, it's not a fun year for Microsoft. But they need to get shaken up, reduce complacency, and get back in the game.

    2010 will likely be much better for them.
  • 2 Hide
    wikiwikiwhat , April 24, 2009 4:19 PM
    Its called development spending. Win 7, MS's new Campus Mall. Giving money to Africa (possibly pirates, wouldn't that be hilarious).

    Doesn't matter to me anyways, I don't buy MS products. Do I use them? Well yeah, but Linux is the best thing since sliced cheese so I don't use it for a OS personally.

    I do play a Xbox 360. Yeah, it has a failure rate but stupid Sony has failed to impress with the PS3 and the Wii. Man, its exactly like owning a gamecube (it collects dust). When will Nintendo realize what they had with the N64 as far as 3rd Party support.
  • 4 Hide
    stryk55 , April 24, 2009 5:08 PM
    This is a true indication of the rough times the global economy is in. Its interesting because Microsoft, more than almost all software and tech companies, are more globalized and as such have a more diverse customer base. When the earnings drop, it shows you that the world economy is spending whole lot less.

    If Microsoft is hurting, the world is hurting.
  • 0 Hide
    rooket , April 24, 2009 5:48 PM
    XP from Dell is generally overpriced to $89. Someone's making fat cash off of that.
  • 0 Hide
    falchard , April 24, 2009 8:27 PM
    Pretty sure that $1.5 Billion less net income compared to last year can be attributed to the numerous lawsuits Microsoft had this year, like the multiple from the European Union, and that $300 million one from the guy who patented product keys.
  • 1 Hide
    tenor77 , April 24, 2009 8:55 PM
    It's that damn Zune!

    Or maybe with the impending release of Win 7 nobody wants to buy Vista........
  • 1 Hide
    norbs , April 24, 2009 10:11 PM
    wonder if there is any correlation between this and the apple profits increase...
  • 2 Hide
    yoda8232 , April 25, 2009 12:17 AM
    Good, look at the quality of Vista and the 360.
  • 0 Hide
    ThePatriot , April 25, 2009 3:41 PM
    About time.
    The only proper product MS makes is Server 2008.
    And there are plenty alternatives to that one.
  • 0 Hide
    goonting , April 25, 2009 11:27 PM
    Server area is getting more Linux nowadays... then some offices in developing countries now use Openoffice
  • 0 Hide
    keither5150 , April 26, 2009 12:39 AM
    Many people are waiting for windows 7..... this could be a factor.

    Bill will have to start eating kraft dinner seeing that MS only made 2.98 billion profit over a 3 month period. He may also have to start driving a used car instead of his limo. I am sure that he will make the sacrafices needed.

    Not too bad considering the economy.

    Good for Apple as well.
  • 0 Hide
    ceomrman2 , April 26, 2009 1:56 AM
    Just like Joe the Plumber, you've confused profit with revenue. Microsoft's profit did not shrink for the first time ever. What shrunk was year over year quarterly revenue. FlayerSlayer called it generally correctly. Xbox is a minor product line, money-wise, and Zune is in fact irrelevant. Both projects are much more about Microsoft's brand image than profits. Servers may or may not be getting "more Linux" but Microsoft's sales of products for servers were up 7% and profits for the division were up 24%, the best of all the divisions, so Linux is certainly not gaining ground unless its sales went up even more.
  • 0 Hide
    anamaniac , April 27, 2009 7:18 AM
    Microsoft, my love, don't die on me!
    What would I do without you?
    Switch to OS X?
    NEVER!

    Switch to Ubuntu? Hmm... sure., It's easy enough to use.
  • 0 Hide
    psiboy , April 28, 2009 12:26 AM
    Oh Wake up people Windows 7 is built on vista!

    http://www.tomshardware.co.uk/microsoft-windows-7-it-enterprise,news-30601.html

    For the record I like Vista... since service pack 1 anyway. The human race is doing the same thing it did to XP ... "Resisting Change"