Weak PC market cuts into Microsoft earnings

The weak market for personal computers is cutting into Microsoft's profits. The US software giant reported a $6.62 billion net profit Thursday for the second quarter of its fiscal year, slightly better than the forecast of Wall Street analysts, but down from $6.63 billion in the same quarter a year ago. Revenue rose five percent in the quarter which ended on December 31 to $20.89 billion, slightly below the $20.93 billion expected by analysts. Earnings per share of 78 cents for the quarter were better than the 76 cents forecast by analysts. "We saw strong demand for our business products and services, despite the soft PC market and continuing economic uncertainty in key parts of the world," Microsoft chief financial officer Peter Klein said in a statement. "We delivered record earnings per share by continuing to manage our costs while investing for future growth," Klein said. Microsoft chief executive Steve Ballmer said the company "delivered solid financial results, even as we prepare for a launch year that will accelerate many of our key products and services. "Coming out of the Consumer Electronics Show, we're seeing very positive reviews for our new phones and PCs," Ballmer said. Softness in the PC market was reflected in sales of Microsoft's Windows software, which powers most of the world's personal computers. Revenue from Windows fell 6.3 percent to $4.74 billion. Microsoft said it has sold more than 525 million licenses for the latest version of its computer operating software, Windows 7. Revenue from Microsoft's business division rose three percent to $6.28 billion and the company said it has sold nearly 200 million licenses for its Office 2010 software during the past 18 months. Revenue from the server and tools unit rose 11 percent to $4.77 billion while Microsoft's online services division saw a 10 percent revenue increase to $784 million. Revenue increased by 15 percent at the entertainment and devices division -- maker of the Xbox 360 game console -- to $4.24 billion. "This holiday season was the strongest in Microsoft history, thanks to good sales execution and compelling products like Xbox 360 and Kinect," Microsoft chief operating officer Kevin Turner said. Microsoft shares were up 2.60 percent to $28.85 in after-hours trading after losing 0.39 percent during the day on Wall Street.