Low PC sales sends Microsoft profits plummeting

Jennifer McClelland | RSS | Fri, Jul 24 2009 | 0 Comments

Microsoft is having a hard time in 2009. This year has so far been the worst for the company in years. For the first six months of the year the company saw weak computer sales as well as frozen corporate tech budgets which led to profits declining by 29 percent.

However, things may be looking up for the second half of the year according to CFO Chris Liddell. He wanted to keep everyone’s hopes up after Microsoft missed expectations by $1 billion and the earnings slipped by a steep 29%.

The earnings topped off a fiscal year in which revenues for the company fell for the first time since 1986, when Microsoft first went public. For the entire year, it said that profits went down 17% or $1.62 a share.

Of course investors weren’t happy to hear the news, sending Microsoft’s stock price down $2, which is 7.8%, to $23.56 a share. In April, Intel’s CEO said that it had seen the worst PC sales and that they had “bottomed out” after the holiday season. Microsoft CFO Chris Liddell said, “we couldn’t necessarily see the bottom. I think that at least we are seeing signs now of the bottom,” in a response to Intel’s statement.

Liddell also made the statement that the remainder of the calendar year will be difficult for PC makers and the software giant because Microsoft’s success is directly linked to the PC industry which is expected to sell fewer computers this year than last. Right now, netbooks are still all the rage and if they are running Windows, they are running XP which means less profits for Microsoft. If Windows 7 comes out and is good enough, then they will begin making more money off the sales of the netbooks due to a higher royalty.

In hopes of stirring up a little demand for the products, Microsoft will be releasing Windows 7 on October 22 as well as a new Office suite in the first half of next year, but these alone will not help the company.

Once upon a time Microsoft was the company everyone wanted to own stock in because it seemed like a pretty safe bet. There was no other competition for them as far as operating systems. If there were other operating systems out there no one really ever paid much attention to them. Now, Microsoft is trying to stop Apple from taking more of the market share than it already has and is fighting with a pretty bad recession.

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Tags: netbooks, apple, microsoft