Microsoft shares tumble after first ever profits warning

Microsoft late yesterday issued its first ever profits warning, blaming weakening economic conditions, and saw its shares drop by eight per cent.

The company said that it would miss analysts' expectations by five to six per cent in its second fiscal quarter this year. Profit per share would be 46 cents against expectations of 49 cents. Sales were expected to be $6.4bn to $6.5bn. Sales were weak across the board, according to the company. It was hit by the US slowdown in PC sales and by a drop in corporate spending. Microsoft Online was hit by the downturn in online advertising. John Connors, Microsoft CFO, said in a statement: "We are seeing a slowing global economy, especially in the US, and some softness in IT spending, that is impacting our desktop business. In addition, the slowdown in online ads is affecting our online business." The company also warned of a five per cent drop in its expected annual turnover and profit. Revenues are now expected to be just over $25bn with earnings per share at between $1.80 and $1.82. Connors said: "We had warned earlier this year that there could be slower PC sales ahead, we were ahead in that forecast , but what we did not expect was how quickly this market would decelerate."