As analysts predicted it might, Microsoft on Thursday reported the company's first ever year-over-year sales decline for the quarter ended March 31.
The software maker said fiscal third-quarter sales totaled $13.65 billion, down 6 percent compared with $14.45 billion in the same quarter a year ago. Its per-share earnings were 33 cents per share, although that included severance and investment impairment charges that reduced earnings by 6 cents per share.
Analysts had been projecting sales of $14.15 billion and per-share earnings of 39 cents, down from 47 cents a year ago, according to Reuters Estimates.
"While market conditions remained weak during the quarter, I was pleased with the organization's ability to offset revenue pressures with the swift implementation of cost-savings initiatives," Microsoft Chief Financial Officer Chris Liddell said in a statement.
The company noted that software sales to large businesses were stable during the quarter, but that weakness in server and PC sales hit its Windows, server and Office units.
Whereas Intel and EMC have been somewhat optimistic that things may have reached bottom last quarter, Microsoft's comments were less hopeful.
"We expect the weakness to continue through at least the next quarter," Liddell said.
The company didn't have much to say on several closely watched topics. The company did not give a specific sales or earnings outlook for the coming quarter, instead only noting what it expects as far as its operating expenses.
As for Windows 7, Microsoft just noted that it "remains on track for a fiscal year 2010 launch." That's even less specific than its usual comment, which is that it should ship within three years from general availability of Windows Vista, meaning by January. The software maker has been pushing to have Windows 7 out in time to be on PCs by this year's holiday season, with recent indications that the company is still aiming for that goal.
Shares closed Thursday at $18.92, up 14 cents. In after-hours trading, investors sent Microsoft shares higher. The stock was trading recently at $19.85, up 93 cents, or nearly 5 percent.
The PowerPoint slides that Microsoft put out to accompany its earnings report offered a few more nuggets. The company saw its online advertising revenue decline 16 percent, causing that unit to fall below what analysts were expecting.
PC unit sales were down 7 percent to 9 percent during the quarter, but the industry's revenue dropped more than that as Netbooks continued to make up a larger slice of sales--a trend that hurts both the PC makers and Microsoft. Microsoft sold 1.7 million Xbox 360s during the quarter, up 30 percent from a year ago and helping push that unit back into the red.
Here's a look at how each of Microsoft's individual units did during the quarter, in terms of both revenue and operating income.