Sales of Netbooks Collapse Dramatically - Microsoft

Shipments of Netbooks Fell 40% YoY in Q1 2011

by Anton Shilov
05/04/2011 | 07:21 AM

It is not a secret that sales of consumer personal computers fell rather significantly in the first quarter of 2011. However, it appears that shipments of netbooks collapsed radically due to many reasons, according to Microsoft Corp., the world's largest developer of software.


"The consumer PC market declined 8% as there are several dynamics at work, including a 40% decline in netbooks, broader consumer macroeconomics, increased competition for consumer spending and the strength of Windows 7 consumer PCs in the prior year. In total, we estimate the PC market declined 1% to 3% in the third quarter," said Bill Koefoed, general manager of investors relations at Microsoft, during the company's recent conference call with financial analysts.

The sharp drop of netbook popularity can be explained by the fact that they do not deliver performance that the end-users expect (performance increase of Intel Atom processors from early 2008 to early 2011 was modest to say at least). In addition, many of those, who used netbooks to consume content either decided to acquire Apple iPad, Samsung Galaxy Tab or wait for other manufacturers to release their tablets.

Microsoft last week announced revenue of $16.43 billion for the quarter ended March 31, 2011, a 13% increase from the same period of the prior year. Operating income, net income, and diluted earnings per share for the quarter were $5.71 billion, $5.23 billion, and $0.61 per share, which represented increases of 10%, 31%, and 36%, respectively, when compared with the prior year period.

Revenue for Windows operating system segment was down 4% in the third quarter of Microsoft's fiscal year. Microsoft business division revenue grew 21% year-over-year. Server & tools revenue grew 11% year-over-year. Online services division revenue grew 14% year-over-year primarily driven by increases in search revenue. Entertainment & devices division grew 60% year-over-year.

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