Microsoft posted the first-ever drop in annual sales of Windows and its quarterly revenue fell a steeper-than-expected 17 per cent as its business continued to be hurt by the weak global PC and server markets.
The news sent Microsoft shares down 8 per cent and took the shine off a big US stock market rally earlier in the day that had driven the Dow Jones industrial average above 9,000 points.
The world's largest software maker, whose operating systems power the vast majority of the world's personal computers, offered little hope for a turnaround in technology until next year, despite recent optimism from rival International IBM and chip maker Intel.
“We still see conditions being challenging for the balance of this calendar year,” chief financial officer Christopher Liddell said in a telephone interview.
"At least sequentially, we are seeing a little bit of growth. While things are not necessarily getting better, they may have bottomed out,” said Mr Liddell.
Microsoft reported fiscal fourth quarter net profit of $3.045 billion, or 34 cents per share, compared with $4.297 billion, or 46 cents per share, in the year-ago quarter.
Profit excluding items was 36 cents per share for the quarter ended June 30th, meeting analysts' average forecast, according to Reuters Estimates.
Sales fell 17 per cent to $13.1 billion, missing analysts' average estimate of $14.48 billion. Annual sales of the company's Windows operating system - its first and most important business - fell for the first time on record.
"They were really light on revenue. They need to explain where the money went. If I was Nancy Drew this would be the case of the missing revenue,” said Kim Caughey, senior analyst at Fort Pitt Capital Group, referring to the fictional detective.
Wall Street highlighted the lack of big tech projects.
“Spending has been sparse by businesses and we're not in full recovery mode yet," said Laxmi Poruri, partner at Primary Global Research. “We're not in big-ticket mode, which is businesses purchasing a lot of equipment and a lot of software. They're doing small projects and that's going to hurt your margins.