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Software giant slips behind as battle between platforms continues.

Yesterday, Microsoft announced Q3 revenue of $16.43bn compared to Steve Jobs’ Apple $24.7bn equivalent figure (wth a net profit of $6bn) on the back of huge iPad and iPhones sales, reported last month. 

This means for the first time ever since 1991, the software ace has slipped behind its iOs rival, in spite of the fact that the latest revenue figure to March 31 represents a 13 percent jump on the previous year.
 
And Google is also catching up, although at a lesser pace, with Q1 2011 profit of $2.3bn, on $8.58bn revenue stream.

Net incomes also rose 31 percent to $5.23bn at Microsoft as did operating income, up 10 per cent, but despite this its search business, which includes Bing continued to drag, with a recorded a loss of $726m on revenues of just $648m.

Revenue for Windows 7 OS also fell 4 per cent although this is “in line with the PC trends” it admitted.

This points to another major trend and one of the principal reasons behind Microsoft’s profit demise: the decline of the PC.

Microsoft are hugely dependent on the PC industry to fuel its core software business. Sales of computers fell in the first quarter of this year.

“The concern is PC markets are being disrupted. There’s some validity [in that],” said one analyst.

And with the ascendancy of portable devices like the iPad and iPhone, as well as Google’s Android, which run off its own OS, is reducing demand for applications like W 7 further.

In addition, research firm Canalys has announced Apple was the world’s fourth-largest PC maker in Q1, after it changed the way it compiled its figures, counting the iPad into its worldwide PC shipments category, for the first time.

 

This sliding demand could also explain why Steve Ballmer’s company was so keen to sign Nokia into a developing a joint OS for Smartphones, which would run on its Windows 7 platform and HTC have also launched a handset running on the platform here.

And revenues could take a further hit if Google Docs, which has emerged as a cheaper version of Office, takes off. 

However, Microsoft insist its search operation is still is growing and noted Bing’s US search share increased to 13.9 percent this quarter and insist they are not fazed by the results.

 “We delivered strong financial results despite a mixed PC environment, which demonstrates the strength and breadth of our businesses,” said Peter Klein, chief financial officer.

“Consumers are purchasing Office 2010, Xbox and Kinect at tremendous rates, and businesses of all sizes are purchasing Microsoft platforms and applications.”

And Office 2010 has become “the fastest-selling version in history,” it also said in a statement.

Entertainment division also fared well, fuelled by Kinect for Xbox 360, which was the fastest-selling consumer electronics device in history and continued strong Xbox 360 console sales.

 

The Washington based giant also reaffirmed its operating expense guidance of $26.9 bn to $27.3 bn for the full year ending June 30, 2011.

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