Microsoft Corp. failed to meet market profits expectations netting only $3.05 billion last quarter compared with $4.3 billion for the same period last year, Market Watch reports. This amounts to a 29% drop in profits.
Microsoft’s $3.05 billion profit came out to 34 cents per share, a little lower than the 36 cents per share expected by Wall Street analysts.
Shares of Microsoft stock are trading down on the news, dropping almost nine percent in Friday trading.
“Contrary to some others in the PC food chain, Microsoft reported June quarter earnings last night that disappointed on almost every metric, and it doesn’t sound like it will get much better any time soon,” said a J.P. Morgan analyst.
Microsoft underperformed in all of its divisions this past quarter. It was unable to make the expected profits in its business, client, and server divisions. Its online services unit posted a much higher shortfall than expected.
These numbers may overstate the extent of Microsoft’s financial trouble. A large promotional program for the upcoming Windows 7 will generate deferred income of $276 million or 2 cents per share. Microsoft cannot technically recognize this income until Windows 7 launches in October.
Also, Microsoft has been praised for its ability to cut cost. Microsoft has cut nearly $3 billion in operating costs and is planning to get rid of 5,000 positions by 2010. However, Microsoft plans to hire 3,000 employees in “more strategic areas” in upcoming months.
Microsoft kept with company practice of not giving a explicit finical outlook during an economic recession but commented that its operating expenses to be between $26.6 billion and $26.9 billion.
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