PC Slowdown Could Spell Tough Quarter For Microsoft

Microsoft CEO Steve Ballmer leans to his right

Research firm IDC just released its PC sales data for the last quarter of 2011, reports TechFlash, and the news is pretty bleak.

Worldwide PC shipments were up only 2.7% from last year’s holiday quarter, and U.S. shipments were down almost 5%. IDC expected worldwide growth of 5.5%

One likely contributor: the rise of tablet devices like Apple’s iPad and the Galaxy Tab. These tablets are probably replacing second (or third) PCs for a lot of users. No wonder Microsoft is finally getting serious about tablets.

Slowing PC shipments are particularly bad news for the company, as desktop PC software like Windows and Office still make up the bulk of the company’s revenue and earnings. Last quarter, Microsoft got a great bump from Office 2010, which came out during the summer. Most of those sales were through retail stores and to big volume licence customers, but about 20% of Office revenue comes from installation on new PCs.

Windows 7 also came out in the last quarter of 2009, which helped spur PC sales. There’s no trigger this year.

Consumer products like Kinect did way better than expected, but those businesses are much smaller and less profitable than the Windows-Office juggernaut.

Microsoft announces earnings on January 27.

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