Microsoft has reported its first drop in annual sales of Windows, with its quarterly revenue falling by a steeper than expected 17% as its business continued to be hurt by the weak global PC and server markets.
The news sent Microsoft shares down 8% and took the shine off a big US stock market rally earlier in the day that had driven the Dow Jones above 9,000 points.
The world's largest software maker, whose operating systems power the vast majority of the world's personal computers, offered little hope for a turnaround in technology until next year, despite recent optimism from rival IBM and chip maker Intel.
'We still see conditions being challenging for the balance of this calendar year,' chief financial officer Christopher Liddell said. But he added that while things were not getting better, they may have bottomed out.
Microsoft reported a net profit of just over $3 billion, or 34 cents per share, for its fourth financial quarter, compared with almost $4.3 billion, or 46 cents per share, a year earlier.
Profit excluding one-off items was 38 cents per share for the quarter ending June 30, slightly ahead of analysts' average forecast. But sales fell 17% to $13.1 billion. Annual sales of the company's Windows operating system - its first and most important business - fell for the first time on record.
Microsoft is preparing to bring out the latest version of its operating system, Windows 7, on October 22. With sales under pressure, Microsoft is focusing on controlling costs, announcing 5,000 job cuts in January.
