Microsoft Downplays PC Sales Slump

Dennis Faas's picture

Microsoft recently dismissed rumors which suggest that PC sales have slowed and are hurting Windows 7 and other Microsoft products.

The response was meant to calm Wall Street investors, shortly after JP Morgan analyst Christopher Danely stated that PC makers Hewlett-Packard (HP) and Acer had slashed their production of semiconductors due to slacking demand.

"We expect the weakness to show up in every end market for semiconductors, just as it always has during downturns," Danely said. "We continue to be cautious on the space due to the large amount of capacity coming online combined with softening demand." (Source:

Microsoft Predicts Sale Increases Thoughout Year

In an address at the Oppenheimber Annual Technology, Media and Telecommunications in Boston last week, Microsoft general manager of investor relations Bill Koefoed downplayed Danely's statements, saying more information was needed before concluding that the PC market is in rough shape.

Microsoft instead points to findings by iSupply, which predicted increases in semiconductor sales through this year. The software giant also noted its recent success, revealing that its fourth-quarter financial results indicate the PC market grew somewhere between 22 and 24 per cent.

Microsoft's overall revenue rose 22 per cent to $16 billion, and the Windows Live Division -- which houses Windows 7 -- expanded by an estimated 43 per cent over that fourth quarter.

Part of Microsoft's confidence has to do with this current quarter, where summer and back-to-school offers help the company to some of its best sales weeks of the year.

Critics Suggest Microsoft is Tied Too Close to PCs

However, the concern of analysts like Danely is that if the PC market slows, so too will Microsoft's growth. That's because the company is so incredibly dependent on the PC market, which on the surface appears to be suffering erosion under the weight of new smartphone and tablet technologies.

For its part, Microsoft doesn't appear too concerned about this dependence on the PC market. "Clearly our business is connected to the number of PCs that get sold," said Microsoft president of North American sales and market Robert Youngjohns.

"But, I think at the same time we have significant ability to sell other stuff related to the PC infrastructure. A substantial part of our business in North America is selling infrastructure software like Windows Server 2008, like SQL Server, like System Center, the stuff that runs the enterprise not just the PC, and that's a business that I think continues to be attractive to us." (Source:

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