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Microsoft's PC foundation crashing

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NEW YORK -- Microsoft is working with manufacturers to produce a line of small touch-screen devices powered by Windows, apparently intended to compete with seven-inch tablets such as the iPad Mini and Amazon Kindle Fire.

Peter Klein, Microsoft's chief financial officer, told investors and analysts on a conference call Thursday that the new devices will be available in coming months at competitive prices.

Microsoft Corp. is struggling to extend its software into smartphones and tablets as consumers are turning away from PCs, the foundation of its empire. Over the winter, it launched two larger tablets under the Surface brand. And in October, the company took a large stake in Barnes & Noble's digital unit, which sells a line of entertainment-oriented seven-inch tablets under the Nook brand.

Microsoft reported financial results for its latest quarter Thursday, showing a deep -- but largely expected -- impact from the slowdown in global PC sales. Investors seemed to be expecting worse after some recent dismal reports on the PC slump.

The software company's net income was $6.1 billion, or 72 cents per share, for the fiscal third quarter, which ended in March. That was up 18 per cent from $5.1 billion, or 60 cents per share, a year ago, and beat the forecast of analysts polled by FactSet, at 68 cents.

However, analysts have trimmed their forecasts quickly in the last few weeks -- a month ago, they were expecting Microsoft to post 77 cents in earnings.

Last week, research firm IDC said PC sales fell 14 per cent in the quarter, a record. It blamed, in part, Microsoft's new Windows 8, which makes a clean break with the look and workings of old Windows in order to work better with touch screens. Buyers seems daunted by the new interface, IDC said.

Revenue was $20.5 billion, up 18 per cent from a year ago and matching analyst forecasts.

Both earnings and revenue were skewed by software-accounting practices. Microsoft offered a $15 upgrade to Windows 8 for Windows 7 PCs purchased June 2 or later. It wasn't able to start recognizing the full value of the software licences until these offers were redeemed or expired. In the latest quarter, Microsoft was able to recognize $1.1 billion of such deferred Windows revenue, greatly boosting the overall figure.

-- The Associated Press

Republished from the Winnipeg Free Press print edition April 19, 2013 B8

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