Microsoft beats Q1 expectations despite earnings slump

Microsoft has seen sharp declines in sales and earnings

There was bad news for Microsoft the day after the launch of Windows 7, after the firm posted a first-quarter 2009 revenue drop of 14 per cent compared to the same period last year.

Operating income and net income stood at $4.48bn and $3.57bn (£2.74bn and £2.18bn), which represented even bigger declines of 25 per cent and 18 per cent respectively compared to a year ago.

Microsoft is blaming the results, which are widely believed to have beaten analyst expectations, on the deferral of $1.47bn (£900m) of revenue relating to the Windows 7 Upgrade Option programme, and sales of Windows 7 to original equipment manufacturers and retailers before general availability.

If these figures were included, total revenues would have dropped by just four per cent year on year, Microsoft said.

"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," said Chris Liddell, chief financial officer at Microsoft.

"We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions."