Microsoft reported yesterday that its quarterly revenue was down compared to the same period last year, the first time quarterly revenues have decreased since the company went public in 1986.
The company’s revenues in the third quarter, which ended March 31, slid by six percent to $13.6 billion. Profits took a much sharper dive, down from $4.39 billion the previous year to $2.98 billion in this quarter, a drop of 32 percent. Still, it could have been worse; a cost-cutting program across several areas of the company prevented an even more dramatic reduction in profit.
Microsoft has been hit hard by consumer and corporate cuts in tech spending, resulting in significant drops in Windows and and business software sales. Research firms IDC and Gartner Inc. said the 2008 holiday quarter was the worst for PC sales in six years and even the small laptops known as netbooks, which have remained popular because of their relatively low price, haven’t done much to alleviate the pressure because they typical run either the less expensive Windows XP or a non-Microsoft operating system. Profit in the Windows division was down 19 percent to $2.5 billion while the Office division slid eight percent to $2.9 billion.
Despite the downturn, analysts seemed generally upbeat about Microsoft’s performance. “I think it was a good quarter in a tough environment,” said Ragen MacKenzie analyst Taunya Sell. Microsoft did “the two things you can do in a tough environment – try to keep costs down, and make sure customers still want to buy your products.” Microsoft CFO Chris Liddell said he expected the weakness to continue “through at least the next quarter.”
Despite the slump, Xbox 360 and PC game revenues were actually up in the quarter, increasing by 16 percent, although revenue per unit was down due to recent price cuts. Microsoft sold 1.7 million Xbox 360 systems down the quarter, compared to 1.3 million in the previous year. Unfortunately, the Entertainment and Devices division as a whole took a slight loss, down two percent over the previous year.