Windows sales fizzle as PCs lose ground to tablets

Sales of Microsoft Corp's flagship Windows software disappointed for the third straight quarter, taking the gloss off better-than-expected earnings that were aided by an unusually low tax rate. The results failed to excite a market already wary about growth prospects for the company and PC industry as netbook sales give way to tablets. The stock was flat in after-hours trading. "All eyes are on Windows and how they are ultimately going to extend this franchise in the future, as the PC business continues to lose share to the tablets," said Josh Olson, technology analyst at money manager Edward Jones. "Microsoft is really a show-me story in terms of its ability to extend its core flagship products to these new growth platforms." On Wednesday, chipmaker Intel Corp warned that PC sales will not be as strong as it had expected this year. Microsoft is expected to enter the tablet market in earnest next year with the launch of its next operating system — code-named Windows 8 — which will be compatible with the low-power chips designed by ARM Holdings favoured by tablet and mobile phone makers. Despite the Windows dip, Microsoft managed to ease past Wall Street's earnings estimates, helped by strong sales of its Office software and Xbox game console, as well as a dramatic drop in its tax bill. The world's largest software maker follows Google Inc, Apple Inc and International Business Machines Corp in reporting surprisingly good results as technology spending holds up relatively well in an uncertain economy. The Redmond, Washington-based company on Thursday posted net profit of $5.87 billion (Dh21.55 billion), or 69 cents per share, up from $4.52 billion, or 51 cents per share, in the year-ago quarter. That easily beat Wall Street's average estimate of 58 cents, according to Thomson Reuters I/B/E/S. Microsoft has beaten the average profit estimate for each of the last nine quarters. Microsoft was helped by an unusually low tax rate of 7 per cent in the quarter, which cut its tax bill by more than $1 billion from the year before, to $445 million. The company, which gets most of its revenue from overseas, said the savings were due to a one-time tax gain and more business flowing through its regional centres in the low-tax jurisdictions of Ireland, Singapore and Puerto Rico. Sales rose 8 per cent to $17.37 billion, ahead of analysts' average estimate of $17.23 billion, boosted chiefly by sales of Office, Xbox and server software behind Microsoft's push into Internet-centric, or "cloud" computing. Microsoft shares fluctuated after the results were announced in after-hours trading, settling close to their closing price of $27.09 on Nasdaq. The stock is up 8 per cent over the past 12 months, compared to a 30 per cent rise in the Nasdaq composite index. from / Gulf News