Microsoft profit falls 22 per cent ahead of Surface tablet, Windows 8 launch

Microsoft Corp's net income fell 22 per cent in the latest quarter as it deferred revenue from the sale of its upcoming Windows 8 operating system to PC makers and Surface tablet.

As PC sales in general took a dive, the software company missed Wall Street expectations and reported net income of $4.47 billion, or 53 cents per share, in the first quarter ended September 30.

This was down from $5.7 billion, or 68 cents per share, in the corresponding period last year.

Revenue fell 8 per cent to $16 billion, missing the average analyst estimate of $16.5 billion.

Microsoft's stock initially fell more than 3 per cent in extended trading after the release of the results but recovered to $29.04, 1.5 per cent below its price, at the close of regular trading.

Analysis of Microsoft's results were complicated by the deferral of $783 million in license fees for PCs pre-loaded with Windows 8.

The Washington-based company can't recognize the revenue until the units go on sale on October 26.

It also deferred $384 million in license fees from PCs that shipped with Windows 7, but are eligible for a $15 upgrade to Windows 8, and $189 million for the PCs that shipped with the new version of Office or are eligible for an upgrade.

Excluding those deferrals and other adjustments, net income was $6.66 billion, or 65 cents per share, down 7 per cent from last year. Revenue was flat with last year's figure at $17.3 billion.

Excluding the deferrals, revenue for the Windows division fell 9 per cent from a year ago, roughly in line with the decline in global PC shipments in the third quarter reported by research firms Gartner and IDC.

Consumers held off buying PCs ahead of Windows 8 and probably steered some of their electronics dollars toward tablets and smartphones.

Windows 8 is the most significant revamp since Windows 95 and sports a completely new look that's intended to be consistent across PCs, tablets and smartphones.

It's designed from the ground up for touch-sensitive screens, and Microsoft has high hopes that it will keep Windows relevant in a world where tablets are starting to eat into PC sales. It's also making its own tablet - Surface - for the first time, and is set to launch them along with Windows 8.

With inputs from Associated Press