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Microsoft Shares Dealt Blow By PC Sales Slump

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

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Sales are up but profits are down, as Microsoft aims to diversify into phones and tablets

Slow sales of the PCs have affected Microsoft’s share price, despite an increased focus on the mobile and tablet markets.

Decreasing demand for new computers has meant that the company’s share price is almost exactly the same as it was this time last year, notes Reuters.

Slowing down

Sales are expected to amount to $20.9 billion (£13.65bn) for the second quarter, which is a five percent increase from a year ago, but still means a profit of just $0.76 (£0.50) per share, down from $0.77 last year.

Microsoft has reportedly told analysts that this recent decline in PC sales along with the Thai floods could have an impact on figures. More than a dozen hard disk drive factories were affected by the widespread flooding in Thailand last year, which was expected to directly impact PC shipments during the first half of 2012.

Only last week, Gartner reported a 1.4 percent decline in global PC sales for Q4 and reported low consumer PC demand over the usually profitable Christmas period. Despite Microsoft diversifying into other areas such as gaming and search, its financial success is still closely linked to sales of PCs.

“I just think it’s going to take a couple of quarters to work itself out,” said Tami Reller, head of marketing for Windows. “It would be naive to believe otherwise. The level in each of the quarters, I think that’s hard to exactly predict.”

Diverse future

During his keynote speech at the Consumer Electronics Show, Microsoft chief executive Steve Ballmer focussed on the Windows Phone, living room entertainment and the upcoming Windows 8 operating system.

Microsoft has been pushing the Windows Platform, with a new flagship device, the 4G Long Term Evolution (LTE) Nokia 900 being unveiled at the show, the third phone running the Windows Phone operating system since the two companies agreed a strategic agreement in February.

However key to Microsoft’s future success could the advent of ultrabooks, ultra-thin, high-spec laptops powered by Intel processors as it would allow it to sell more expensive versions of Windows and other software such as Microsoft Office. Ultrabooks have been prominent at CES, with many manufacturers displaying their latest models at the show.