Microsoft Reports Worst Fiscal Quarter in History

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Perhaps it’s a measure of Microsoft’s decades of success that the company can earn over $3 bilion in profit during a fiscal quarter and have the results trumpeted as the worst in the company’s history…but there it is. Microsoft has reported financial results from its fourth fiscal quarter of 2009, posting net income of $3.09 billion for the quarter on revenue of $13.1 billion. However, the company’s income for the quarter represents a 29 percent decline since the fourth quarter of 2008; for Microsoft’s entire fiscal year, the company saw its profit slide 17 percent to $14.6 billion, a decline of 18 percent from 2008. The results mark the first time revenue has declined since Microsoft went public in 1986.

“Our business continued to be negatively impacted by weakness in the global PC and server markets,” said Microsoft CFO Chris Liddell, in a statement. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”

In addition to a soft PC market, Microsoft’s fourth quarter numbers were also hurt by almost $200 million in legal charges, over $100 million in investment losses, and some $40 million in severance to employees. However, the bulk of the revenue drop is widely viewed as an effect of the lethargic PC industry: in the tight economy, both consumers and corporations are scaling back or deferring new PC purchases. Since so much of Microsoft’s revenue is tied to the sales of new PCs, drops of global PC sales mean a drop in Microsoft’s revenue. Despite a record fiscal quarter from competitor Apple, industry watchers don’t see Microsoft losing significant market share to competitors; instead, Microsoft’s overall market is contracting.

Microsoft says it expects the rest of the 2009 calendar year to be a financial challenge; however, the company does have a potential cash cow named Windows 7 coming out on October 22, and if the global economy does begin to ramp up later this year and 2010, Microsoft can expect to see an upturn in money flowing into its coffers as PC sales pick up again.

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