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Microsoft revenue falls for first time

MICROSOFT Corp said on Thursday that its quarterly revenue fell from the previous year for the first time in its 23-year history as a public company, while its profit dived 32 percent.

The declines 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, and on Thursday it announced it would do away with merit pay increases for employees in the next fiscal year.

Microsoft did not issue earnings guidance for the rest of the year, and it offered no hope for a rebound in the current quarter.

"I didn't see any improvement at the end of the quarter that gives me encouragement that we're at the bottom and coming out of it," said Chris Liddell, Microsoft's chief financial officer.

Even so, Microsoft shares gained 2.6 percent in extended trading after the earnings report, having closed earlier at US$18.92, up 14 US cents.

Microsoft said in its fiscal third-quarter, which ended March 31, profit was US$2.98 billion, or 33 US cents a share. In the same quarter of 2008, Microsoft earned US$4.39 billion, or 47 US cents a share.

One-off payments

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

Excluding such items, Microsoft said it would have earned 39 US cents per share, matching the estimate of analysts surveyed by Thomson Reuters.

Microsoft avoided a steeper drop in profit by slashing costs in several areas, such as sales and marketing, which it cut by 9 percent to US$3 billion.

Revenue in the past quarter slipped 6 percent to US$13.6 billion, missing analysts' expectations for US$14.1 billion.

"I think it was a good quarter in a tough environment," said Taunya Sell, an analyst for Ragen MacKenzie. The firm did "the two things you can do in a tough environment - try to keep costs down, and make sure customers still want to buy your products."

Microsoft makes most of its profit selling the Windows operating system and business software such as Office, and those divisions have been hammered over the past six months as consumers and businesses sharply cut their technology spending.

The holiday quarter, which ended in December, was the PC industry's worst in six years, according to research groups IDC and Gartner Inc.



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