updated 09:20 am EDT, Fri October 23, 2009
Microsoft faces third quarterly decline
Microsoft today reported its third consecutive decline in quarterly revenue. The company's total revenue during the summer dropped a sharp 14 percent year-over-year to $12.92 billion and is attributed almost exclusively to the Windows division, whose own revenue fell 38.76 percent to $2.62 billion. It also saw a decline in the overall health of its Business and Online Services groups.
The Entertainment and Devices group, which handles Windows Mobile, Xbox and Zune development, declined very slightly in revenue to count for $1.89 billion but is one of the few highlights of the summer and nearly doubled its net income to $312 million. The boost is likely to be fueled by stronger sales of the recently price-cut Xbox 360 as well as early sales of the Zune HD.
The software developer claims that the revenue decline doesn't entirely reflect its actual performance. As accounting rules have dictated that the company defer the revenue from any Windows 7 pre-orders bought between July and September, about $1.47 billion in revenue had to be omitted from the company's books. Including it in the firm's results nonetheless still results in a four percent from a year ago to $14.39 billion.
Microsoft chief financial officer Chris Liddell says that, despite the loss, the firm is "very pleased" with the results as they show a strong demand for the just-launched Windows 7 and that the company's extensive cost and job cuts early in the year have had an effect. Microsoft's actual net income was still significant at $3.57 billion.
Ahead of the release, CEO Steve Ballmer had warned that Microsoft would only see a slight sales boost from Windows 7 and so doesn't expect the software to immediately restore fiscal health. Guidance in the results reflects the cautious point of view and now has Microsoft lowering its expected annual revenue from $26.5 billion to $26.2 billion for its full fiscal year, which ends June 30th.