updated 07:49 pm EDT, Thu October 18, 2012
Drop exaggerated by Windows division profit offset
In a week loaded with poor quarterly reports from industry giants, Microsoft has joined the ranks of companies with lower-than-expected profits. Microsoft's quarterly profit fell 22 percent, likely from the drop in other companies' computer sales running Windows. The greater-than-expected drop sent Microsoft's shares down 1.5 percent in after-hours trading.
Microsoft declared that fiscal first quarter profits dropped to $4.47 billion from $5.74 billion a year ago. Sales fell eight percent to $16.01 billion from weak Windows PC sales and the struggling global economy. Analysts expected sales of $16.4 billion, even accounting for the soft PC market worldwide.
Revenue decline was increased from Microsoft's deferral of $1.36 billion in revenue from its Windows unit, which it is expecting to regain next quarter after the release of Windows 8. Microsoft is expecting the Windows 8 release and the onslaught of new hardware tailored to the OS release to boost revenues. Microsoft Chief Financial Officer Peter Klein said that "there's demand for compelling devices and a connected set of cloud experiences. That's what Windows 8 is all about."
Daniel Ives, financial analyst at FBR Capital Markets said "investors were not expecting a home run. All expectations are on the launch of Windows 8 and the entrance into the tablet market. In light of the environment, the macro and PC situation, these are respectable numbers."