Bloomberg News

Microsoft Says Fourth-Quarter PC Shipments May Have Fallen Short

January 18, 2012

Jan. 11 (Bloomberg) -- Microsoft Corp., the world’s largest software maker, said industrywide sales of personal computers will probably be lower than analysts projected in the fourth quarter because supply was hurt by flooding in Thailand.

Analysts have estimated that total PC shipments fell about 1 percent in the period, Tami Reller, chief financial officer of Microsoft’s Windows unit, said at an investment conference yesterday. The actual number is probably lower, she said. Bill Koefoed, Microsoft’s general manager of investor relations, echoed those remarks at a separate event.

“As the numbers come out, you’ll likely see that number decline further as the impact has been felt faster than people had anticipated,” Koefoed said at a JPMorgan Chase & Co. conference. Reller told the audience at a Nomura Holdings Inc. event that there could potentially be more downward adjustments. Both conferences were held in Las Vegas, where the Consumer Electronics Show is under way.

Last year’s flooding in Thailand, which knocked disk-drive factories off line, took a toll on a PC market that was already suffering from competition with smartphones and Apple Inc.’s iPad. Sales in Microsoft’s Windows unit, which makes the operating system software that runs most PCs, have missed estimates in three of the past four quarters. The comments probably mean they will fall short again, said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon.

‘Under Siege’

“The Windows business is under siege,” said Barnicle, who had estimated that PC shipments dropped 1 percent in the quarter. He rates Microsoft shares “sector perform.” “Windows is their most profitable business. If that’s not stable for whatever reason -- Thailand, Apple -- it just becomes difficult for the stock to gain momentum.”

Shares of Redmond, Washington-based Microsoft slipped 1.8 percent in extended trading after the comments were reported. The stock had closed at $27.84 at the close in New York.

Analysts on average predict the company’s total sales in the fiscal second quarter, which ended in December, will rise 5.3 percent to $21 billion, according to data compiled by Bloomberg.

Microsoft is working to release a new operating system, Windows 8, that’s designed to work on iPad-like tablets, helping it compete with Apple. A public test version is set for February, and Reller gave a preview last night during Chief Executive Officer Steve Ballmer’s keynote address at the Consumer Electronics Show.

The executives declined to comment yesterday on when the final version will go on sale. Analysts expect it later this year.

PC Makers, Intel

PC shipments rose 3.6 percent in the third quarter, according to market researcher IDC, less than the 4.5 percent growth the firm had predicted. Hewlett-Packard Co. was the world’s biggest PC seller in the quarter, according to IDC, followed by Lenovo Group Ltd. and Dell Inc.

Intel Corp., the world’s biggest computer-chip maker, cut its fourth-quarter revenue forecast by $1 billion last month, citing the disk-drive shortages.

The floodwaters engulfed much of the industrial heartland north of Bangkok, sidelining production of disk drives and components. The affected area produces about a quarter of the world’s drives, IDC estimated in November.

Drive manufacturers are still working to recover, though some have bounced back faster than they had expected. Western Digital Corp., one of the harder-hit companies, has resumed production and raised its quarterly revenue forecast.

Still, these types of shortages take time to go away, Microsoft’s Reller said.

“It tends to take a few quarters to work its way through the system,” she said. “It would be naive to believe otherwise.”

--Editors: Jillian Ward, Nick Turner

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net;

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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