Why Microsoft Was Smacked By The Drop In PC Sales And Intel Wasn’t

paul intel bunny suit

Microsoft just reported earnings for the March quarter (Q3 of its fiscal year 2011), and Windows sales were off 4%. That’s almost exactly in line with IDC’s numbers for PC unit sales, which were down 3.5%.

Investors are selling the stock after hours — it’s down about 2%.

That’s probably because they were expecting Microsoft to echo Intel last week, which saw 17% revenue growth in its PC business despite the slowdown.

In a call, Microsoft investor relations head Bill Koefoed explained the discrepancy.

  • Intel moved its netbook business to a different segment. This allowed Intel’s PC business to escape the dramatic slowdown in netbook sales. Koefoed said that Microsoft saw netbook sales drop 40%. Microsoft didn’t blame the iPad specifically, but it’s a reasonable assumption that low-cost computer buyers are turning more to tablets.
  • Intel benefited from an inventory buildup by PC makers as it introduced its new Sandy Bridge processors during the quarter.
  • Intel was reporting a 14-week quarter as it realigned its fiscal year to the calendar year. Microsoft’s quarter ran on 13 weeks.
  • Intel’s average selling price went up, while Microsoft kept prices the same from last year.

Intel also supplies chips for the Mac, which showed year-to-year sales growth of 25% during the quarter. Microsoft doesn’t get the same immediate benefit from Mac sales, although it does sell Office for the Mac.