Page last updated at 21:42 GMT, Thursday, 23 July 2009 22:42 UK

Microsoft profits down by a third

Microsoft sign
Microsoft said it expected another tricky quarter.

Microsoft has reported disappointing results for the April to June quarter, with profits down by almost a third.

Net profit for the period was $3.1bn (£1.9bn), down by 29% from the same period a year earlier. Revenue came in at $13.1bn, down 17% from a year ago.

The results were worse than analysts had been expecting.

The world's largest software maker said it had been affected by weakness in the global personal computer (PC) and server markets.

Cost cutting

In after hours trading, Microsoft shares fell more than 7%, reflecting the market's disappointment with the results.

"It looked like a pretty tough quarter for Microsoft. The top line was very weak," said Toan Tran at Morningstar.

The one bright spot was the company's cost-cutting measures.

"In light of the environment, it was an excellent achievement to deliver over $750m of operational savings compared with the prior year quarter," said Chris Liddell, Microsoft's finance chief.

Microsoft makes most of its profit selling the Windows operating system and business software such as Office.

However, demand has been hit by falling sales of PCs as consumers and businesses trim spending.

Microsoft - which became a public company in 1986 - has been looking at ways of cutting costs.

In January, it said it would cut up to 5,000 jobs over the next 18 months, including 1,400 immediately.

Increasing pressure

To make matters worse, the company is coming under increasing pressure from internet search engine Google, which recently announced a better-than-expected rise in second quarter profits.

Google is developing an operating system for personal computers in a direct challenge to market leader Microsoft and its Windows system.

Microsoft itself is poised to launch its new operating system, Windows 7, this autumn.

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