Microsoft revenue down 6%; worse than predicted

Microsoft news was bleak across all of business units, but servers and tools

Microsoft revenue dropped in year-over-year comparison for the first time in its 23-year history as a public company as the software giant reported a whopping 6% decline in revenue for its fiscal third quarter coupled with a 32% decline in net income as compared to the same quarter a year ago.

A poll of analysts by Thomson Reuters showed expectations for third-quarter revenues of US$14.09 billion, down from $14.45 billion in the same quarter last year.

The news was bleak across all of Microsoft's business units, with drops in every segment except servers and tools. The server and tools business had been Microsoft's most consistent performing business segment for the past two years.

And Microsoft officials said they are not predicting any change for at least the next quarter, which ends June 30. Last quarter, Microsoft said due to volatility of market conditions that it would no longer offer quantitative or earnings per share guidance for the rest of fiscal 2009.

In the earnings report, Microsoft showed revenue of $13.65 billion for the third quarter ended March 31. Revenue for the same quarter in 2008 was $14.45 billion.

Microsoft said revenue in client, business division, and server and tools was down due to weakness in the global PC and server markets.

The company did report that revenue from enterprise customers remained stable. The company has been negotiating with volume licensing customers as it works to get them to resign agreements.

"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," Chris Liddell, chief financial officer, said in a statement. Last quarter, Microsoft announced it was laying off 1,400 employees.

During its fiscal third quarter, Microsoft released the beta version of the Windows 7 and sent roadmaps for other key products including Office 2010, Windows Server 2008 R2 and Windows Mobile.

It has been a tough week in the tech sector, as IBM reported an 11.4% drop in revenue for the quarter, and Yahoo showed a 78% decline in year-over-year net income during its fiscal first quarter.

The one bright spot was Google, which reported year-over-year revenue growth of 6% for its fiscal first quarter.

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John Fontana

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