Windows 8 fails to boost Microsoft

MicrosoftMicrosoft's earnings slipped 4% in the fourth quarter of last year, despite a lift from its latest version of Windows.

The results are the first to include Windows 8, a dramatic overhaul of the operating system which powers most PCs. Windows 8 came out on October 26 with slightly more than two months left in Microsoft's fiscal second quarter.

Although Windows 8 sales have not been as impressive as investors hoped, revenue in Microsoft's Windows division climbed 24% from the previous year.

BGC Financial analyst Colin Gillis said Microsoft "has multiple revenue streams that are still very nice businesses". "I kind of like the Windows segment," he said, adding that the 24% growth was "a little stronger than expected".

Microsoft earned 6.4 billion US dollars (£4.04 billion), or 76 cents (48p) per share, during the final three months of the year. That was down from 6.6 billion US dollars (£4.17 billion), or 78 cents (49p) per share, a year earlier. The company's total revenue rose 3% from last year to 21.5 billion US dollars (£13.6 billion).

Microsoft is counting on Windows 8 to help the company extend its franchise into tablet computers while still reaping revenue from a new breed of PCs. The redesigned software displays applications in a mosaic of interactive tiles instead of a staid menu. It can be controlled by touching on a display screen, as well as the traditional method of using a keyboard and a mouse.

Besides debuting Windows during the most recent quarter, Microsoft also released a new version of its operating system for smartphones. If Microsoft's revamped software for tablets and smartphones catches on, it would help the company overcome a downturn in PC sales, which has reduced licensing revenue during the past year. Worldwide PC shipments fell 3.5% last year, marking the industry's first annual decline since 2001, according to research firm Gartner.

Despite Microsoft's high hopes and an elaborate marketing campaign, Windows 8 appears to have got off to a tepid start since its October 26 release. Technology reviews have panned the software as too confusing and cumbersome to navigate, and none of the hundreds of devices running on Windows 8 emerged as a breakout hit during the holiday season.

Microsoft's own tablet, the Surface, has also been unable to mount a significant challenge to Apple's trend-setting iPad, Amazon's Kindle Fire, Samsung's Galaxy or Google's Nexus devices. Surface, which runs on a streamlined version of Windows 8, is meant to showcase how well the software works on a tablet.

Mr Gillis said Windows 8 is Microsoft's attempt to solve a disruption in the market which is taking place because of tablets. He said: "It's too early to declare it a success or a failure. The sentiment on the PC market is just too negative. Yes, there are disruptions going on but we still sell close to a million PCs a day."
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