The abrupt revenue drop caught investors by surprise, causing Microsoft’s shares to dip three percent in extended trading. The stock recovered to $ 29.04, however — 1.5 percent below its price at the close of regular trading.
Net income was $ 4.47 billion in the fiscal first quarter, more than a $ 1 million drop from the $ 5.7 billion it earned during the same quarter in 2011, Microsoft reported Oct. 18. Profits plummeted eight percent to $ 16 billion, well below the average analyst estimate of $ 16.5 billion.
PC sales are expected to tumble this year for the first time in 11 years due to the stale economy and the iPad’s domination of the market, says research firm IHS,
Microsoft is betting at least part of it financial future on its Surface tablets, which it will launch, along with its new operating system, Windows 8, on Oct. 26.
Mass production of the Surface tablets began earlier this month. Microsoft has since placed an order with Asian component suppliers to build 3 million to 5 million Surface tablets for this quarter.
The device, which is 9.3 millimeters thick and weighs 1.5 pounds, is similar in size to Apple’s iPad at 9.4 millimeters thick and weighing 1.44 pounds. The tablet has a 10.6-inch display, a built-in kickstand and magnetic cover that doubles as a touch keyboard. The new device will run on the Windows 8 operating system.
Microsoft is jockeying for a firm position in the raging tablet war. Although Apple and Google are the dominant players, Amazon, Lenovo and Barnes & Noble have also entered the fray.