

Microsoft (ticker MSFT) may have to get used to slowly declining sales of its’ cornerstone Windows operating system software as consumers switch from traditional desktop PC’s to more convenient and mobile tablet computers. Recent studies by some investment firms are showing cannibalization of traditional PC sales by the iPad and other models of tablet computers.
Announcing results for the first quarter of 2011, the company reports that sales of Windows fell 4% from the year earlier quarter while overall profits jumped 31% on a 13% revenue increase. Sales grew for Microsoft’s new Office application suite, Kinect videogame sensor, and server and tools software.
Today’s Wall Street Journal (wsj.com) reports that Microsoft’s chief financial officer, Peter Klein, has said the decline in sales of Windows OS was primarily in Microsoft’s Windows sales for consumer PCs, mainly the inexpensive notebook computers known as netbooks. He said Microsoft saw a 40% decline in sales of netbooks during the quarter. Mr. Klein said competition from tablet sales “played a part” in weak demand for consumer PCs, along with broader pressure on consumer spending from higher fuel prices and other factors. He didn’t mention the iPad by name, but Apple Inc.’s hot-selling device accounts for the vast majority of tablets currently sold.
The weakness in consumer PC sales isn’t unexpected. Two market research firms, International Data Corp. and Gartner Inc., recently said global PC shipments in the first three months of the year fell 3.2% and 1.1% respectively.
The stock, which long ago ceased being the growth stock it once was, is showing the effects of analyst concerns over the decline in sales of the company’s flagship product, currently trading at $25.60, down 4% from yesterday’s close of $26.71.
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