Falling PC Sales Cut Microsoft's Profit Margin

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With the rise of tablets, sales of desktop and notebook PCs have been declining. And software giant Microsoft Corp. is obviously feeling the heat of falling sales. As the company tackles slow PC sales, which is impacting the Windows business, it is also struggling to make a dent into the faster-growing mobile phone and tablet markets.

According to Reuters, the value of Microsoft shares are not expected to change much on Thursday when the software giant presents its financial results.

However, the report quoted Barclays Capital analyst Raimo Lenschow as saying, “It is clear that investors will continue to need to be patient. There could be positive short-term momentum ... but we first need to see proper evidence of mobile/tablet success rather than just signs of hope.”

Meanwhile, last week at the Consumer Electronics Show in Las Vegas, Microsoft gave an indication of tough times ahead. Speaking to analysts on Tuesday, Microsoft’s marketing executive for the Windows unit Tami Reller highlighted the most recent decline in PC sales and warned that the floods in Thailand are slowing the shipments of disk-drives, which s further adding to the problem, wrote Reuters reporter Bill Rigby.

Focusing on the impact of shortages, the report quoted Reller, as saying, “I just think it's going to take a couple of quarters to work itself out.”

“It would be naive to believe otherwise. The level in each of the quarters, I think that's hard to exactly predict,” noted Reller.

Microsoft’s cautious outlook for PC sales was supported by Gartner’s report, which shows a 1.4 percent decline in global PC sales for the fourth quarter, wrote Rigby. According to Gartner’s study, Rigby wrote, the effect of disk-drive shortages will be felt in the first half of this year.

In reality, “the market watcher thinks that continuous low consumer PC demand is bad news for Microsoft, whose financial success is still closely bound to computer sales, despite its forays into gaming, servers, Internet search and phones,” wrote Rigby.

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Ashok Bindra is a veteran writer and editor with more than 25 years of editorial experience covering RF/wireless technologies, semiconductors and power electronics. To read more of his articles, please visit his columnist page.

Edited by Jennifer Russell
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