Microsoft posts first year-over-year revenue decline ever

Microsoft is a technology giant. One of those companies that everyone knows about, and whose products most people have used at some time or another. Unfortunately that all means zero when we’re in the middle of a recession and both PC and Windows sales are down.

Microsoft today announced its financial results for the third quarter of the year. There’s good news and bad news, but the majority of it would take a spin doctor with bags of talent to come close to being positive. As there aren’t any of those available, you’re stuck with me.

The big news is that this third quarter 2008-2009 saw Microsoft post the first ever year-on-year decline in revenue since it went public in 1986. Revenue for the quarter was $13.65 billion, down 6 percent from the $14.45 billion reported for the same period a year ago. Net income was also down, this time dropping 32 percent from $4.4 billion (47 cents per share) last year to $2.98 billion (33 cents per share) this year.

These two figures were lower than analysts expected, with most predicting revenue of $14.1 billion and earnings per share of 39 cents. These figures come despite Microsoft embarking on its first serious round of layoffs, with around 5,000 employees being cut. I’d expect more to follow.

According to The New York Times, Christopher P. Liddell, Microsoft’s chief financial officer said during a conference call concerning the quarterly results:

I didn’t see any improvement at the end of the quarter that gives me encouragement that we are at a bottom and coming out of it. They stopped getting worse, but that’s different from they started getting better.

While we would all like to think a recovery will be soon and painless, we actually believe it will be slow and painful.

In terms of individual sectors of the business, most performed poorly. Revenues from Windows was down 15.6 percent to $3.40 billion. Online, including search, saw revenues decline 14.5 percent to $721 million, mostly due to a 16 percent drop in advertising revenues. No wonder Microsoft is still keen on teaming up with Yahoo!.

Overall Microsoft has been badly hit by both the recession preventing people from upgrading their systems, and PC sales dropping by around 8 percent. If it wasn’t for the burgeoning netbook business then the results would look even worse.

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