Microsoft has reported its first ever fall in annual sales,
proving that even the most powerful companies are not immune to the
effects of the recession.
The software firm's net income for its fourth fiscal quarter
fell to $3.05bn, or 34 cents a share, 29% down from the same period
a year ago.
Microsoft's 17% drop in quarterly revenue of $13.10bn was
$1.27bn below estimates, knocking shares down more than 7% to
$23.70 in after-hours trading.
For the full fiscal year, Microsoft's revenue declined 3% to
$58.44bn, while its net income fell 18% to $14.57bn.
Analysts say Microsoft's sales decline is not down to the
recession alone, but also the failure of its Windows Vista
operating system to attract business interest.
A study by Forrester Research shows 86% of corporate PCs
continue to rely on the eight-year-old Vista predecessor, Windows
XP, according to the
New York Times.
The popularity of netbook PCs, which rely on the lower-priced
Windows XP, has also been responsible for Vista's poor
performance.
But analysts say Microsoft has survived the downturn better than
many other companies, posting profits at a time when losses are
more common.
They predict Microsoft will capitalise on large-scale PC
upgrades that will come as firms that have been delaying spending
are finally forced to replace ageing computers.
Although Microsoft's slump comes in contrast to more positive
news from Intel, IBM and Apple and pushed shares lower, analysts
predict investors will not be deterred.
Many believe Microsoft will be carried on the crest of the wave
of
renewed optimism in the tech sector.
IDC predicts
brisk sales for Microsoft's forthcoming Windows 7 operating
system.
The company is also generating interest among investors around
its recently unveiled Azure cloud computing platform and Bing
search service.
Microsoft's shares are still up nearly 60% since their low point
in April on hopes that new product launches will revive its
fortunes next year, according to the
Financial Times.
Christopher Liddell, chief financial officer at Microsoft, said
the company was not anticipating any further big declines from
current levels of spending by its customers and sees "potential for
improvement" in 2010.