Slumping PC Sales Could Mean Trouble for Microsoft Windows

Microsoft’s quarterly numbers may rival the GDP of a small nation, but some numbers for the most recent quarter have analysts suggesting the company needs to expand beyond the traditional lines of business that fuel so much of its bottom line.

Microsoft’s third-quarter revenue hit $16.43 billion, a year-over-year increase of 13 percent. Net income rose 31 percent, to $5.23 billion. Revenue for the company’s Business Division rose 21 percent year-over-year, a solid figure nonetheless thoroughly outpaced by the Entertainment and Devices Division, which reported a 60 percent year-over-year increase.

Sales of Office 2010 and the Xbox Kinect hands-free controller helped drive much of that revenue, but buried within those rosy numbers is at least one statistic that could prove troublesome for Microsoft if it continues in future quarters: The Windows segment reported a 4 percent dip, something Microsoft explained in a statement ahead of its April 28 earnings call as “in line with PC trends.”

Although Windows 7 has sold some 350 million licenses since its October 2009 launch, global sales of PCs declined over the last quarter. Microsoft estimated that PC dip at between 1 and 3 percent, while analyst firm IDC suggested 3.2 percent.

“A spike in fuel and commodity prices and disruptions in Japan” were at least partially responsible for the slackening, according to IDC, along with a “cautious business mentality and waning consumer enthusiasm.”

Other analysts echoed those sentiments.

“Much of the prior PC dynamics continue to impact its Windows business performance,” Gleacher & Co. analyst Yun Kim wrote in an April 29 research note. “This negative trend is more than offsetting positive impact coming from the strong corporate PC refresh cycle and enterprise adoption of Windows 7.”

The rise of tablets is also having an effect on that market segment. “New form factors, i.e., tablets are having some impact on its consumer business,” Kim wrote. “Specifically, netbooks declined 40 [percent] in the quarter.”

For more, read the eWEEK article: Windows Weakness a Cause for Concern: Analysts.