Microsoft plummets: 'Welcome to the post-PC era'

Shares in Microsoft plummeted Friday as investors reacted badly to a poor earnings report that reflected the company's difficulties adapting to a technology market ruled by mobile devices and smartphones. Shares in the company, once the world's most valuable technology firm, were down 12 per cent Friday, reflecting the worst single-session decline since January 2009.
With Google falling sharply, too, after a disappointing earnings report, Marketwatch.com reflected a widespread feeling of gloom with its headline: "The party may be over for tech stocks." The swoon was in marked contrast to Microsoft's performance so far this year, when it has risen by close to 30 per cent to become one the best performers in the technology sector.
Seen against this longer trend, Friday's drop may not have been a disaster. But Thursday's earnings report, which revealed just how badly the company is faring in two key areas for its future, the Windows 8 operating systems and Surface RT tablet computers, spooked investors so badly that they rubbed 32 billion dollars off the company's valuation.
The Wall Street Journal trumpeted: "Welcome to the Post-PC Era." The fear is that the Bill Gates-founded software behemoth, which enjoys a near monopoly in operating systems for personal computers, has no answer to changing market conditions in which consumers and companies are spending more of their tech budgets on smartphones and mobile devices, which are dominated by bitter rivals like Apple and Google.
According to research firm IDC, PC sales slumped by more than 11 per cent in the most recent quarter. With more than 80 per cent of Microsoft's revenue coming from Windows-related business, the steady decline of the PC sector has some analysts predicting a gloomy future for the company.
To be sure, Microsoft is not fiddling while its empire burns. Last week, chairman and chief executive Steve Ballmer announced a major corporate reorganisation to better enable Microsoft to compete in mobile services. But investors got a cold shiver down their spines when chief financial officer Amy Hood announced an almost 900-million-dollar writedown on the value of its unsold Surface tablets. She admitted that it would take "a long time" for Microsoft's position in tablets to make up for the shrinking consumer PC market.
Despite the stock dive, many of its big shareholders are likely to stay loyal and bear in mind Microsoft's history of coming from behind to dominate tech markets. The company still has 77 billion dollars in cash reserves, and an imminent update to Windows 8 is expected to address many of the concerns that hampered uptake of that operating system, analysts note."Microsoft is far from on death's door," Gartner tech industry analyst David Cearley told USA Today. "They are aggressively addressing a wide range of market challenges. Yes, they still have significant execution challenges, but, going forward, they remain a strong player in the market."
Marketwatch's Therese Poletti was less blasé about the threat. "Technology is going through some wrenching changes, as each company deals with the shift to mobile devices, the sluggish PC market and an increase in the use of cloud computing," she wrote. "Earnings this week are showing how many core businesses are being disrupted by the shifts. Investors need to pay attention.