Today Microsoft’s fiscal second quarter 2012 earnings results answered the question of just how weak PC demand was.

For Q2, ended December 31, Microsoft revenue was $20.89 billion, up 5 percent year over year. Operating income: $7.99 billion, a 2 percent decrease. Net income was $6.62 billion, or 78 cents a share. Both were flat year over year.

Average analyst consensus was $20.93 billion revenue and 76 cents earnings per share, for the quarter. Revenue estimates ranged from $20.20 billion to $21.35 billion, with estimated year-over-year growth of 4.9 percent — modest for a holiday quarter.

The problem lies in the Windows & Windows Live division, which dragged down Microsoft operating and net profits.

The division’s revenue fell 6 percent year over year. Worse: Operating income declined by 11 percent.

Microsoft estimates that global PC sales fell between 2 percent and 4 percent, greatly contributing to Windows revenue decline. Consumer PC sales fell by 6 percent, while those to businesses actually rose — by 2 percent. Netbooks fell 2 percent.

OEM revenue fell by 7 percent, which reflects weakness in PC shipments identified by Gartner and IDC. Three-quarters of Windows divisional revenues comes from OEM sales.

Consumers aren’t buying Windows PCs like they used to and they are buying more tablets – read Ipad.

In addition, according to an IDG Connect study released this week, IT and business professionals are rapidly adopting iPads as partial or complement laptop replacements; remember these people make technology purchase decisions for entire corporations — Microsoft’s core market.

Sixteen percent have replaced their laptop with an iPad and 54 percent supplement it. The data suggests that iPads are significantly starting to cannibalize PC sales — and not just among consumers — and it’s consistent with recent global PC buying trends.


About the Author

Onuora Amobi is the Founder and VP of Digital Marketing at Learn About The Web Inc. Onuora has more than a decade of information security, project management and management consulting experience. He has specialized in the management and deployment of large scale ERP client/server systems.

In addition to being a former Microsoft MVP and the founder and editor of, he is the CEO of a Pasadena based online marketing education startup - Learn About The Web Inc. ( and The Redmond Cloud (

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  • ECM2

    And what’s sad is Microsoft admitted they’re going to kill Windows Phone 7 – the potential MS savior.  No plans to release WP7-based ARM tablets to compete with $100-400 Android tablets and WP7 phone is not being groomed as a “serious” player (e.g. no Citrix support up to now).  Win8 tablets are long due and when finally released they will command a price of $600-1,000. It’s going to be an Android world and a lot of my techie friends are starting to switch to Android. But me? Still an MS kid and waiting ………

    • Johnathan Penberthy

      Are you mad ECM2, Windows 8 tablets will range from more like $300 to $1000+.  My company is building a low end tablet running Windows 8 now.  MSRP being $350.  Additional, I don’t know where you heard WP7 is being killed off when they are spending 100M in advertising this year.  I feel you are no Windows fan and should have no say in Windows or Microsofts consumer trends.

      • ECM2

        Waiting to see.  Waited for years .. so what’s a few more months of waiting to get a $350 windows tablet. Co-workers can’t – so now I’m the only one promoting windows phone and windows tablet in our circle. Also still waiting for Citrix Receiver for my HTC Titan (WP7 phone).  But if I don’t get this one soon, I’ll grab the Samsung Galaxy Note when it becomes available on AT&T. Not easy being alone in an Apple and Android world… unless you stay home all day.

      • ECM2

        Nice to know your company is building a $350 Windows 8 tablet. Let me know when it’s out. I will be the first to buy. But for $400 or more …nayyy.

  • TypeG33K

    The real problem with Windows-8 is, well, Microsoft.  
    Microsoft is a octopus of a company which cannot focus on one aspect and stick to it.  
    First it was which turned to which is now Took them 3 tries before finally sticking to one model and pursuing investing in it.  
    Anybody remember Windows Mobile?  I don’t understand how Microsoft couldn’t dominate the industry 10 years ahead of competition.  The OS had all the features but none of them worked 100% all the time – a pain to use and certainly not meant for the average consumer. If Microsoft had the focus of Apple or Google, we would all be using “Windows Phone 7” (or whatever it may have been called).  

    I’m typing this on a Windows 8 machine.  And quite frankly I’m fairly satisfied with it – given I’m using this on a laptop.  However, my next purchase will most certainly not be another desktop or laptop – it will most likely be a tablet.  
    How will Windows 8 fare against iPad and Android tablets?  We will only come to know once they arrive.  Microsoft has kicked the can far enough down the road.

    The next few years are going to be very interesting.