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Saturday January 26, 2013

Microsoft profit dips ahead of Office revamp

SEATTLE: Microsoft Corp's quarterly profit edged lower as Office software sales slowed ahead of a new launch, offsetting a solid but unspectacular start for its Windows 8 operating system and sending the company's shares down 1.4%.

The results mark a stark change from the 1990s, when Microsoft was the unchallenged king of computing and the release of a new Windows operating system would supercharge sales, generate excitement and generally boost its stock.

None of that appears to be true now, as Microsoft has been overtaken by Apple Inc and Google Inc in the rush toward mobile computing, while sales of traditional desktop computers are in decline.

“There's still no sign that Windows 8 is a gangbuster,” said Andrew Bartels, an analyst at Forrester Research. “Compared with prior periods, where you saw a big increase when a new one came out, you're not seeing that.”

Profit at the world's largest software company slid to US$6.4bil, or 76 cents per share, in the fiscal second quarter, from US$6.6bil, or 78 cents per share, in the year-ago quarter.

Wall Street had expected 75 cents per share, on average, according to Thomson Reuters I/B/E/S.

Overall sales rose 3% to US$21.5bil, Microsoft said on Thursday, in line with analysts' estimates.

The biggest factor weighing on Microsoft was a 10% decline in sales at its Office unit to US$5.7bil, which took into account the loss of deferred revenue relating to discounted upgrades to the new version of the software, expected shortly.

“It's a pause before a product launch, which is typical,” said Josh Olson, an analyst at Edward Jones.

Windows sales jumped 24% to US$5.9bil, slightly ahead of analysts' average expectations, which had been gradually lowered over the last few months. That also included some deferred revenue relating to discounted upgrades.

Microsoft said it has sold more than 60 million Windows 8 licences since its late-October launch, an unexceptional start for a product which has not gripped the public's imagination in the way of Apple's iPad.

The company already announced 60 million Windows 8 sales two weeks ago, broadly in line with Windows 7 sales three years before. Reuters

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