The Redmond, Washington based Microsoft reported a colossal, more than one billion dollar revenue deficit for the fourth-quarter that sent major tech stocks tumbling and dashed hopes of a instantaneous revival in the tech sector.
Microsoft’s results have undone the good work done by the better-than-expected quarterly results from chip makers Intel Corp (NASDAQ: INTC; SEHK: 4335) and Texas Instruments Inc (NYSE: TXN).
The dismal results
Indicating that the demand for the company’s flagship products Windows and Office software is still waning in the wake of worldwide recession, revenue at Microsoft fell 17 percent to $13.1 billion, well short of the $14.5 billion envisaged by analysts.
Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon said of the results, “It’s a real disappointment. It’s a significant miss.”
For the full year ended in June, the Steve Ballmer led company posted its first ever annual sales decline when it reported a drop of 3.3 percent in sales on an annualized basis. The sales figure for the entire year stood at $58.4 billion.
The company reported a 29 percent dip in profit as well. Fourth-quarter net income stood at $3.05 billion compared with $4.3 billion in the comparative period last year.
The unrelenting recession also made a dent in Microsoft’s online ad business. Sales in the unit dipped 13 percent to $731 million as prices for Internet ads and graphical banners plummeted.
Danger bells still ringing
Chris Liddell, chief financial officer of Microsoft said on a conference call, “The economy continues to be challenging and we need to lift our game to another level.”
He noted that while there are indications that the worst is over, he cautioned that the industrial climate will remain tough, at least for the rest of this year.
Scott Richter, a portfolio manager at Fifth Third Bank that holds 750,000 shares of Microsoft averred, “There’s continued fear of spending on the capital side in corporate America and globally. Companies are in lock down mode. The only way people are generally making the numbers is through cost cutting.”
Microsoft too has been doing precisely that. It has slashed costs to tide over the gloomy recession. The company eliminated, the first time since its inception, as many as 5,000 positions. The company, put in abeyance, opening new offices, cut travel cost and even lowered pay for contract workers.
For the quarter, Microsoft slashed expenses by $800 million more than the forecast for the quarter, but even that did not prevent it from registering ominous financial numbers.
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