Microsoft profits drop as recession bites

Published on Friday 24 July 2009 21:20

MICROSOFT has reported a 29 per cent slump in fourth-quarter profits after a year in which its revenues fell for the first time since 1986.

The software group's revenues of $13.1 billion (about 7.94bn) – down 17 per cent – were well short of Wall Street expectations.

Microsoft posted earnings of $3.05bn for the quarter and $14.6bn for the year to 30 June, a fall of 17 per cent as customers switched to low-profit, lightweight netbook models.

The results reflect how Microsoft's fortunes are tied to the PC industry, which is expected to sell fewer computers this year than last – the first decline since 2001.

Many buyers are upgrading machines less frequently to save money in the recession. The hottest segment of the PC market is netbooks, which usually run Windows XP and thus generate less profit for Microsoft.

The firm offset some of the decline by cutting almost $1bn in operating expenses.

Chief financial officer Chris Liddell said Microsoft did well considering the economic climate, adding: "We are a stronger company than we were a year ago."