PC sales slump likely to affect windows

http://i.i.com.com/cnwk.1d/i/tim/2011/04/27/Win7_HomePremium_web_270x378.jpgWhen Microsoft announces its fiscal third quarter earnings after the market closes today, most analysts will zero in on one data point–how Windows is selling.

Windows–one of the three engines that powers Microsoft sales and profits, along with Office, and server software–seems likely to have a sluggish quarter. Two weeks ago, research firm IDC surprised industry watchers with a report that global PC shipments declined 3.2 percent during the first quarter, compared with the year-ago period, citing “cautious business mentality and waning consumer enthusiasm.”

“Clearly, the PC market is under pressure,” said Adam Holt, a Morgan Stanley analyst. And since the vast majority of PCs run Windows, Microsoft earnings are under some pressure too.

There’s little doubt that Microsoft will report its best-ever fiscal third quarter revenue. But with slowing PC shipments, Windows, which should account for about 28 percent of Microsoft’s overall sales this quarter, will be a drag on earnings. Slowing sales of Windows, long the fuel for Microsoft’s economic engine, is cause for some concern.

On Tuesday, Holt cut $200 million from his projections for Windows sales in the fiscal third quarter to $4.47 billion, a 4 percent decline from the year-ago period. And since Windows accounts for about 28 percent of Microsoft’s overall revenue, Holt nudged his overall quarterly estimates downward, expecting the company to earn $4.47 billion on sales of $15.8 billion.

Read more @ Cnet News

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