Microsoft’s first revenue decline in 23 years

(By Richard Holway 11.00pm 23rd Apr 09) Microsoft has recorded its first revenue decline in 23 years. Q3 revenues fell 6% yoy to $13.6b. Profits were down 32% at $3b. By the way, still a 32% profit margin.

Microsoft’s client division (which sells Windows etc) suffered a 16% drop in revenues. Vista has been a real flop. Microsoft is clearly praying that Windows 7 will reverse their fortunes.
Revenue from Internet services fell 14% to $721m as Microsoft falls further behind Google. Microsoft's Business Division, which sells the Office productivity suite, saw a 4.7% sales drop to $4.5b. Sales in the Entertainment and Devices unit (ie the X-box) dropped 4.7%, to $1.6b. The only good news came in the Server group which increased sales by 7% to $3.4b.

Nothing in the Microsoft announcement should come as any surprise. The immediate outlook looks no better. But Intel’s results last week indicated that perhaps a nadir had been reached in the semi conductor market. But even if that feeds through into stabilised PC sales, will it benefit Microsoft? Maybe it's smartphones and netbooks that will benefit in the next uptick – areas where Microsoft makes much less (or nothing) per unit. And then there is Cloud ready to chip away at the wondrous Microsoft cash generation model.