Microsoft first quarter revenues fall on Windows and Office sales decline

CEO Steve Ballmer claims sales will pick up when Windows 8 is launched

Software giant Microsoft has posted first quarter fiscal revenues down 7.9 per cent to $16bn (£10bn), from $17.372bn (£10.8bn) achieved in the same period a year earlier.

The company claimed that the results partly reflected a decline in PC sales, as well as the deferral of $1.36bn (£850bn) in advanced sales of the forthcoming Windows 8 operating system, due for release 26 October, and a related upgrade offer for Microsoft Office.

Broken down by division, the Windows & Windows Live Division, which includes PC operating systems, related software and online services, and PC hardware products, posted a sharp fall in revenues of 33.4 per cent, from $4.874bn (£3.03bn) to $3.244bn (£2.02bn).

The Microsoft Business Division, meanwhile, which includes Microsoft Office and Dynamics customer relationship management software, saw revenues decline by a smaller amount, by 2.4 per cent to $5.5bn (£3.42bn).

In the Entertainment and Devices Division, a marginal decline in revenue to $1.946bn (£1.21bn) masked a 26 per cent decline in sales of the flagship Xbox console, with unit shipments dropping from 2.3 million to 1.7 million, year-on-year. The Xbox forms part of Microsoft's entry in the "battle for the living room" and is a fully internet connected entertainment device.

Server & Tools, though, which includes server operating systems and the SQL Server database, as well as software development tools, became the second-largest division in Microsoft as it posted an increase in sales of 8 per cent to $4.552bn (£2.83bn).

The disappointing results follow on from fourth-quarter and full-year results to the end of June 2012, in which the company posted its first-ever quarterly loss due to the write-down on the disastrous $6bn (£3.74bn) acquisition of online advertising company aQuantive.

CEO Steve Ballmer, though, has suggested that the company is in the process of re-orienting towards devices and services, as reflected by the imminent release of the Microsoft Surface tablet computer, as well as smartphones based on the Windows Phone 8 operating system.

The front-end to the company's forthcoming series of operating systems is intended to provide a unified "look and feel" between various different devices, although it has not yet taken off on smartphone devices after more than a year on the market.