Software giant Microsoft posted its quarterly earnings late Thursday and the numbers were far short of what Wall Street was expecting.
Wall Street was hoping for earnings of 75 cents per share, but in the end Microsoft reported 66 cents. It was not all bad news, as revenue rose 10 percent to hit $19.9 billion, but even that was short of the Street’s expectations, as analysts were hoping for a figure north of $20 billion.
Net income was $4.97 billion. Sales of Microsoft Office were good, but the result of weak PC sales was still evident. Windows sales were $4.4 billion, well below analysts’ expectations. It appears that both Microsoft and the analysts underestimated the extent of the PC slump.
Microsoft CFO Amy Hood said consumer PC shipments dropped 20 percent last quarter. This directly hurt Windows sales, but indirectly it also affected Office sales. One of the more disappointing parts of the report was a $900 million charge for Microsoft’s inventory of unsold Surface RT tablets.
A week ago Microsoft slashed the Surface RT price in an effort to get rid of excess inventory, but it seems it was too late. Wall Street likes blood in the water and Microsoft fell 6.3 percent in after-hours trading on Thursday. However, the stock performed rather well, with a 33 percent increase this year.
With Microsoft’s tablet strategy faltering, and no end in sight to the malaise in the PC market, the party may be over, at least for now.