Microsoft Sees Dip in Windows Sales Amid PC Decline and Mobile Device Fears

Strategic Insights -

Microsoft, the world's largest software company, has reported a decline in quarterly sales of its core Windows operating system, mirroring a downturn in personal computers. Despite strong sales of its Office suite and Xbox systems, the company's stock has been affected by fears that Apple's iPad and other mobile devices will erode the PC business. Microsoft's shares fell 2% to $26.15 after hours following the earnings report, with some analysts labeling it a "value stock" due to its strong free cash flow and balance sheet.

Key Takeaways:

  • Microsoft's Windows sales declined due to a dip in PC sales, with a 1% drop in the first three months of the year.
  • PC sales are expected to outpace consumer sales through the next 12 months, according to CFO Peter Klein.
  • The company has sold a record-breaking 350 million licenses for its Windows 7 operating system since its launch 18 months ago.
  • Investors are concerned that new gadgets, led by the iPad, are disrupting the PC market and may eventually separate Microsoft from its core customers.
  • Despite exceeding Wall Street's expectations for seven straight quarters, Microsoft's stock remains at 2001 levels.

Statistics:

  • Microsoft's shares fell 2% to $26.15 in after-hours trading.
  • PC sales fell 1% in the first three months of the year.
  • Microsoft sold a record-breaking 350 million licenses for Windows 7 operating system since its launch 18 months ago.
  • The company's shares are down 14% over the past 12 months, compared with a 16% gain in the Nasdaq.
  • Microsoft's net profit increased 31% to $5.2bn, or 61 cents per share.
  • Excluding a one-time tax benefit, profit met Wall Street's expectations of 56 cents per share.

Sources:

  • Thompson Reuters I/B/E/S
  • BGC Financial
  • Global Equities Research
  • Capital Advisors Growth Fund
  • I Media LLC 2011