Microsoft's Windows battles slack PC sales

Thu Jan 19, 2012 6:51pm EST
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By Bill Rigby

SEATTLE (Reuters) - Microsoft Corp's fiscal second-quarter profit fell very slightly as lagging computer sales to cash-strapped consumers in the United States and Europe hurt its core Windows business.

Companies and emerging markets are still hungry for new PCs, according to the latest data, but customers in mature markets are ditching their Windows-powered netbooks in favor of Apple Inc's iPad, Inc's Kindle or postponing a PC purchase until the economy improves.

"There's really three things that impacted the consumer side," said Peter Klein, Microsoft's chief financial officer, reflecting on the dip in computer sales.

"The supply chain from Thailand, there's some macro (economic factors) and certainly some competition from alternative form factors such as tablets and readers."

Tech research firm Gartner reported a 1.4 percent decline in global PC sales for the fourth quarter, aggravated by a shortage of hard disk drives caused by recent floods in Thailand.

Microsoft went further, estimating the PC market fell between 2 percent and 4 percent in the quarter, almost entirely due to the collapse in the market for netbooks, the small laptops which accounted for one in 12 PC sales last year.

As a result, Microsoft's key Windows unit reported a 6 percent dip in sales to $4.7 billion. The situation shows no immediate signs of improvement.

The company warned that the disruptions in Thailand will continue to affect PC sales in the first part of this year, while it has yet to feel the benefit of new lightweight laptops -- dubbed "Ultrabooks" by chipmaker Intel Corp -- which are just starting to hit stores.   Continued...

<p>Microsoft CEO Steve Ballmer speaks at the last opening Microsoft keynote at the Consumer Electronics Show opening in Las Vegas January 9, 2012. REUTERS/Rick Wilking</p>