The Windows division's share of Microsoft's revenue last quarter dropped to a four-year low as Windows 7 sales stalled before the launch of Windows 8, financial data released by Microsoft yesterday showed.
The Windows and Windows Live group posted sales of $3.2 billion during the three months ending Sept. 30, a drop of 33% from the same period the year before.
Revenue was reduced by the $1.2 billion that Microsoft deferred to cover sales of Windows 8 to computer makers preparing their new hardware for launch next week, and for a deal that debuted off in June which promises buyers of new Windows 7 PCs a $14.99 upgrade to Windows 8.
Even without those deferrals, the Windows division would still have posted a 9% downturn compared to the third quarter of 2011.
As it has for several quarters, Microsoft again blamed poor PC sales for the weak Windows numbers.
Peter Klein, Microsoft CFO, called the PC market "challenged" Thursday during the company's earnings call with Wall Street analysts. "In addition to a tough economic environment and competitive pressures, OEMs drew down their Windows 7 inventory as they began the transition to Windows 8," Klein said.
Only in the quarter's final month did Windows sales tick up, but those were to computer makers buying Windows 8, and thus were deferred until next quarter.
Microsoft executives did even not bother citing PC sales statistics Thursday, as they usually do, perhaps because they were so depressing.
"We saw the overall PC market decline this quarter in advance [of] the launch of Windows 8 and in part due to competitive pressures and the challenging macroeconomic climate," Bill Koefoed, the general manager of Microsoft's investor relations, said in the earnings call yesterday, without naming numbers.
According to Gartner and IDC, global PC sales were down 8.3% to 8.6% in the third quarter.
The portion of Microsoft's total revenue of $16 billion generated by Windows was just 20.3%, the lowest in the last four years, and slightly below the earlier low record set in the third quarter of 2009, the period immediately before the launch of Windows 7.
A year ago, Windows accounted for 28% of Microsoft's revenue. The four-year high was 36.3% in the fourth quarter of 2009, the first three-month stretch of Windows 7 sales.
The one bright spot, said Microsoft, was that the third-quarter sales of Windows 8 to OEMs -- $783 million -- were up 40% over the same quarter just prior to the launch of Windows 7.
And Klein continued to press the optimism button about Windows 8. "October 26 only marks the beginning of the journey we will take together with our partners and developers," he said. "Our collective success will be evident over time as we change the way people experience the power of technology."
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