Microsoft has said sales in the first three months of 2009 fell 6% from the previous year - its first quarterly drop in 23 years as a public company.
The world's largest software maker said profit dropped by 32% to $2.98bn (£2bn). Sales slipped to $13.65bn.
Microsoft makes most of its profit selling the Windows operating system and business software such as Office.
However demand has been hit by falling sales of personal computers as consumers and businesses trim spending.
"We expect the weakness to continue through at least the next quarter," said the firm's chief financial officer, Chris Liddell.
'On track'
Microsoft - which became a public company in 1986 - has been looking at ways of cutting costs.
In January, it said it would cut up to 5,000 jobs over the next 18 months, including 1,400 immediately.
Microsoft's fall in profit was more severe than analysts had been expecting.
"There's stuff to be happy with - they're controlling costs and getting that under control," said Kim Caughey, a senior analyst with Fort Pitt Capital.
"The bad thing is demand and consumer preference seems to have affected their top line."
Shares in Microsoft rose by 4% in after-hours trading - possibly reassured by comments from the firm that it was on track to release the next version of its operating system, Windows 7, during its 2010 financial year.
Hey their stock is at least up in After hours trading .
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Windows 7 prices are too high
Might discourage takeup
A RETAIL ANALYST with NPD Group, Stephen Baker, has said that Microsoft's pricing for Windows 7 is "way too much for the software."
Microsoft's least expensive Windows 7 upgrade will be for the Home Premium version and will cost £79.99 in the UK, $119.99 in the US. "That $120 is a pretty big nut," said Baker, "especially when you can buy a new PC for around $300."
In a post to the company blog, Baker said that the Vole's Windows 7 upgrade prices, along with the pain of having to perform an incremental software upgrade, could deter punters from moving off Vista, with all of its problems, in order to "erase all vestiges of Vista from consumers’ homes" and "move to a far superior platform with a better user experience."
Baker also criticised Microsoft for not offering a multi-licence family upgrade package for Windows 7, saying "In a world, at least in the US, where most homes are moving into a multiple PC environment, it would enhance the consumer home experience if they could upgrade all their home PCs at a single low price with a single boxed purchase."
He noted that Apple will be offering its Mac OS X 10.6 Snow Leopard release for just $29 for a single-licence upgrade and only $49 for a five-licence family upgrade bundle. "This is a direction I would have much preferred to see Microsoft head," he said.
To that we would add that Microsoft's relatively high prices for its Windows 7 full system installation packages will discourage users from upgrading their older PCs that are still running Windows XP. The least expensive full package of Windows 7, the Home Premium version, will be priced at £149.99 in the UK and $199.99 in the US.
Sure, additional memory is relatively inexpensive now, but many people will likely hesitate to pay a hundred-fifty to two hundred more clams on top of that just to acquire the Vole's latest OS.
If users with older PCs can't afford to shell out the better part of a grand to buy a new PC and monitor, they'll likely consider installing some user friendly flavour of Linux for free instead of ponying up the substantial wad of dosh needed to get Windows ME II SP7.
Microsoft suffers first sales dip...
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Re: Microsoft suffers first sales dip...
Hybrid Mode
