Microsoft Windows Demand Falls Short of Forecast

Microsoft’s (MSFT) results for the fiscal third quarter ended March reflect weaker than expected results for the company’s Client division, according to Charly Tracy, director of investor relations at the company.

Tracy notes that revenues from the Client division - the Windows business - had been expected to be down 18%-20% year over year, but actually fell 24%. He notes that Microsoft believes PC market growth was 8%-10% in the quarter, below the company’s previous estimate of 9%-11%. I would note here that other estimates of Q1 PC unit growth are higher: IDC says units grew 12.3%; Gartner says growth was 14.6%.

Tracy says PC unit growth in mature markets was slower than expected, with emerging markets growing a little faster than expected. And he notes that the company monetizes PC growth better in mature markets.

Tracy notes that the Microsoft Business Division’s revenues came in about $20 million to $30 million below expectations. He says the server and online businesses were in line with expectations. He says the entertainment and devices segment was ahead of plan, driven by strong Xbox 360 sales; Tracy says the company sold 1.3 million units in the quarter, down from 4.3 million in the seasonally strong December quarter, but up from 500,000 a year ago.

Tracy says the company bought back about $1 billion of stock in the quarter.

Tracy says the company is not seeing any broad spillover into its business from slowing in the macro economy; he notes that the enterprise oriented sectors are doing well, with server and tools up 18%, and the business division up 17%.

In after hours trading, MSFT is down $1.38, or 4.3%, to $30.42.

Comments

[cvillelb:]

"he notes the company monetizes PC growth better in mature markets" Talk about an understatement. Would anyone care to hazard a guess what MSFT's share price would be if the 95% of illegal copies of Windows software in China were actually purchased, not pirated?

2008 Apr 24 08:29 PM

[Trader T:]

Vista has been a disaster. Businesses are sticking with XP and PC owners aren't upgrading either. XP service pack 3 should let most PC users bridge the gap for the next few years - or switch to Mac's.. Young college grads entering the business world will be bringing their Mac's with them also.

2008 Apr 24 08:35 PM