Microsoft’s Quarter Profit Expected Lower as Smartphones, Tablets Dominate

(Reuters) – A year ago, Microsoft Corp blew away Wall Street’s earnings
forecasts with blistering sales of its new Windows 7 operating system
and trumpeted optimism about the recovery in tech spending.

This week, with its stock
trading slightly lower than a year ago, the world’s largest software
company is set to report lower profit as PC sales growth fizzles, and it
struggles to convince investors that it can grab a foothold in the
fast-moving mobile and tablet markets.

"Microsoft
is still a juggernaut in the PC business, Windows-based machines are
still selling over 300 million a year," said Tim Bajarin, president of
tech research firm Creative Strategies.

"But
they missed the smartphone revolution, and even though they were the
first to really push the tablet, Apple basically redesigned it and left
Microsoft in the dust."

Most
investors expect a solid quarter for the company, but are more focused
on fears that Microsoft’s new Windows phone software isn’t selling well.
And while approving of a recent decision to make a version of Windows
for ARM chips, the market realizes that means there won’t be a
Windows-based challenger to Apple Inc’s iPad for at least two years.

"I
wish they did this (the switch to ARM) two years ago, it’s something
they should have thought of," said Sid Parakh, analyst at McAdams Wright
Ragen. "But it is a long game. The question becomes: Is the iPad a
cannibalization of Microsoft’s existing products, or an added component
of consumer electronics spending? I’m sure it’s a mix of both."

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