Microsoft feels more recession fallout, sales drop

SEATTLE (AP) — Microsoft Corp. said Thursday its quarterly revenue fell from the previous year for the first time in its 23-year history as a public company, and its profit fell more sharply than Wall Street was expecting.

The shortfall illustrated the toll the recession has taken on the world's largest software maker, even though Microsoft remains one of the richest and most profitable companies. In January, Microsoft said it needed to resort to its first mass layoffs, cutting 5,000 jobs.

Redmond, Wash.-based Microsoft said Thursday that in its fiscal third-quarter, which ended March 31, profit dropped 32 percent to $2.98 billion, or 33 cents per share. In the same quarter of 2008, Microsoft earned $4.39 billion, or 47 cents per share.

Microsoft's profit included a $290 million charge for severance from some of the layoffs announced in January. The software maker also wrote down $420 million related to investments that lost value.

Analysts surveyed by Thomson Reuters expected a stronger profit, 39 cents per share.

Sales in the last quarter slipped 6 percent to $13.6 billion, falling short of analysts' expectations for $14.1 billion in sales.

Microsoft makes most of its profit selling the Windows operating system and business software such as Office. Those divisions were hurt when PC shipments fell for the second straight quarter as consumers and businesses sharply cut back on technology spending.

The Windows division's revenue sank 16 percent to $3.4 billion, while the division that makes Office saw sales drop 5 percent to $4.5 billion.

Shares of Microsoft added 14 cents to close at $18.92. In extended trading after the earnings report, the shares gained 5 percent.