Microsoft admits PC shipments down ahead of next week's earnings report

Microsoft execs are noting a week before reporting Q2 fiscal 2012 earnings that flooding in Thailand last year is affecting PC shipments.
Written by Mary Jo Foley, Senior Contributing Editor

Microsoft officials are continuing to decline to answer Wall Street's questions about the timing and rollout plans for Windows 8. But they did acknowledge this week that PC market growth will likely fall short of expectations -- something that may impact Microsoft's Windows client revenues for the latest quarter and beyond.

(Microsoft is scheduled to report its fiscal 2012 second quarter earnings next week on January 19. Back in October, when it reported FY2012 Q'1 earnings, Windows/Windows Live Division revenue was $4.87 billion, up two percent over the prior period, which Microsoft officials said was “in line with the PC market.”)

PC market growth expectations back in October were in the mid-single digits, but IDC and Gartner lowered those back in December to "minus-one," following massive floods in Thailand that affected disk-drive suppliers. That is according to Bill Koefoed, Microsoft's General Manager of Invetstor Relations, who spoke to financial analysts at the JP Morgan Tech Forum on January 10.

"We will see that number decline further as the impact (of floods in Thailand) is felt faster than people anticipated," Koefoed said. "The supply chain is recovering faster than expected, but it has had an impact on the PC market."

Microsoft officials reiterated at the Consumer Electronics Show this week in Las Vegas that Microsoft has sold 500 million copies of Windows 7 to date.

Tami Reller -- the Chief Financial Officer and Chief Marketing Officer of Windows/Windows Live -- told Nomura Securities' Director of Research Rick Sherlund that businesses are about a third of the way through their desktop migrations from Windows XP to Windows 7, with 90 percent of large businesses ultimately committed to deploy Windows 7. She also noted that Microsoft has designed Windows 8 with the understanding that businesses will be running mixed Windows 7/Windows 8 environments for some time to come.

Neither Koefoed nor Reller would answer analysts questions this week about Windows 8 timing (beyond the fact that the one and only Windows 8 beta is still on track for delivery in late February). Koefoed wouldn't comment on a question about whether Microsoft will roll out Windows 8 for tablets and PCs at the same time or on a staggered basis. He did say that developers should be able to write their Metro-style applications once and "compile for different processors" across Intel/ARM PCs and tablets.

Microsoft execs and the company's OEM partners still aren't showing or saying much about the coming generation of ARM-based Windows 8 PCs and tablets. At CES this week, a number of Microsoft OEMs and system builders showed off new ultrabooks that will be capable of running Windows 7 and WIndows 8 both. Dell showed off its first ultrabook, the XPS 13, coming in "early 2012." Lenovo showed off a new kind of convertible ultrabook, the IdeaPad Yoga, that is due in the second half of this year.

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