Any assertions that the technology sector is immune to the global recession were dispelled yesterday after Microsoft revealed its revenue for the quarter had fallen 6% to $13.65 billion.
The software giant’s net profit for the three months to March fell 32% to $2.98 billion, a figure that included $420 million in investment write-downs and $290 million in redundancy payments. The company announced in January that it would be cutting 5,000 staff, approximately 5% of its headcount.
Microsoft CFO Chris Liddell said the situation was unlikely to improve in the near future: "We remain more cautious than most about the state of the world economy. While we’d all like to think the economic recovery will be soon and painless, we unfortunately think it will be slow and painful.”
Despite the announcement, the company’s shares rose 3% to $19.48, with analysts speculating that this was due to investor confidence in the company’s cost-cutting measures.
Sales in the company’s client division – which includes Windows – fell 15% to $3.4bn, with notable declines in emerging markets. Microsoft is under increasing pressure to monetise these markets, which are seen as increasingly attractive opportunities by open source vendors.
The company is also under pressure to develop its online services business, including Windows Live and Azure, which have been losing a startling amount of money despite heavy investment: the division has lost $1.5 billion in the past nine months.
It also faces a battle to convince enterprise buyers that Windows 7 is worth the upgrade, many of whom regarded Vista with some scepticism. A recent survey suggested that 83% of enterprise IT departments would wait at least a year before deploying Windows 7.