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Microsoft Earnings Drop, Cites Slower PC Demand Ahead of Windows 8 Launch

Oct. 18, 2012
Software maker Microsoft announces 8% revenue drop $1.36 billion in revenue is deferred CEO Steve Ballmer says Windows 8 launch starts new era Revenue up 9% in online services division

U.S. computing giant Microsoft (IW 500/15) posted Thursday lower earnings and revenues for its fiscal first quarter, citing the slowdown in the personal computer market.

Microsoft said net profit fell 21% from the year-ago quarter, to $4.5 billion, nevertheless topping Wall Street estimates.

Earnings per share excluding exceptional items were 65 cents, well above the average estimate of 56 cents.

Revenue fell 8% in the 2013 first quarter that ended Sept. 30, to $16 billion, as sales fell ahead of the release of its new Windows 8 operating system, next week.

$1.36 Billion Deferred

Offers of Windows upgrades, pre-sales of Windows 8 to computer builders and hardware manufacturers, and an upgrade offer on its new Office meant a deferral of $1.36 billion of revenue and 13 cents of diluted earnings per share, the company said.

"The launch of Windows 8 is the beginning of a new era at Microsoft," said Steve Ballmer, Microsoft's chief executive.

"Investments we've made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers, and partners."

The Redmond, Wash.-based company will release its new Surface tablet computer -- running on Windows 8 and designed to challenge Apple's iPad -- on Oct. 26.

"While enterprise revenue continued to grow and we managed our expenses, the slowdown in PC demand ahead of the Windows 8 launch resulted in a decline in operating income," said Peter Klein, Microsoft's chief financial officer.

A Hefty 33% Drop

In the Windows and Windows Live division, revenue fell to $3.24 billion, down a hefty 33% from a year ago.

The business and the entertainment divisions posted slight drops in revenue.

The bright spot was the online services division, which saw revenue of $697 million, up 9% from a year ago. Microsoft said online advertising revenue grew 15%, driven mostly by an increase in revenue per search.

The company reaffirmed its fiscal 2013 operating expense forecast of $30.3 billion to $30.9 billion but offered no other financial guidance.

Copyright Agence France-Presse, 2012

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