Microsoft slips to $16 billion in revenue before Windows 8, Surface launch

The tech giant takes a billion dollar hit

Right after Google inadvertently announced their missed quarterly earnings, Microsoft announced a disappointing first-quarter revenue of $16.01 billion (£10 billion, AU$15 billion) during an investors call today.

The numbers represent a dip from last year's first-quarter report of $17.37 billion (£10.5 billion, AU$16 billion) in revenue as shares drop from 68 cents to 53 cents per share this year. Operating income was also down to $5.31 billion (£3.3 billion, AU$5.12 billion), from $7.21 billion (£4.5 billion, AU$7 billion) last year.

Microsoft pointed to a tough PC marketplace and economy as one of the reasons for the downturn, as well as investments in getting Windows 8 off the ground.

The tech giant has a lot riding on the new operating system and hopes Windows 8 will help create some positive numbers.

"The launch of Windows 8 is the beginning of a new era at Microsoft," said Microsoft CEO Steve Ballmer in a press release.

"Investments we've made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers, and partners."

The dirty details

The Windows & Windows Live Division was hurt the most - it saw a 33 percent decrease from last year. And, it made $3.24 billion (£2 billion, AU$3.1 billion) in revenue this year.

Microsoft's Server & Tools division reported $4.55 billion (£2.8 billion, AU$ 4.4 billion) in the quarter - an 8 percent increase. It's Business division posted $5.50 billion (£3.4 billion, AU$5.3 billion), which is a 2 percent decrease.

The Online Services Division reported $697 million (£433 million, AU$672 million) in revenue, a 9 percent increase. Lastly, the Entertainment and Devices Division saw a 1 percent decrease to earn $1.95 billion (£1.2 billion, AU$1.88 billion).

In the financial summary, Microsoft posted a flat adjusted revenue of $17.4 billion (£10.8 billion, AU$16.7 billion), and an adjusted operating income of $6.7 billion (£4.2 billion, AU$6.4 billion), which is down 7 percent.

The company also said the numbers reflected $1.36 billion (£8.4 million, AU$1.31 billion) of deferred revenue related to Windows upgrade offers, special offers for the upcoming Office suite and pre-sales of Windows 8 to manufacturers.

Microsoft looks ahead

As PC sales begin to slow Microsoft is looking to other markets to help get it out of its slump. But the turn around might come as early as next week.

That is when the company will launch Windows 8 and its new Surface tablet.

"With a modern user interface, ability to support multiple form factors and a rich platform to build apps, Windows 8 opens up significant opportunities for partners developers and customers," Bill Koefoed, General Manager of Investor Relations, said during the conference call.

Windows 8 just might help Microsoft get out of the pure PC game and help the company avoid the pains of a shrinking PC market. And, the OS will release on a variety of platforms such as smartphones and tablets and not just the PC.

In fact, Microsoft announced pricing and started pre-orders for its Surface tablet. The 32GB Surface will cost $499 (£399/AUD$559) and $599 (£479/AUD$679) bundled with its cover/keyboard.

Windows 8 and the new Surface might just turn the tide over the next few months. We'll see as Microsoft will announce its second-quarter earnings Jan. 24.

Via Microsoft