Microsoft posts disappointing fourth quarter results after weak sales of computers and servers.

Computer giant Microsoft has reported disappointing fourth quarter results, with both profits and revenues taking a hit in the economic downturn.

Weak sales of computers and servers have resulted in a drop in profit by about a third compared to the same time last year.

Net profit for the period was $3.1 billion (£1.9bn), down 29% from last year and total revenue was $13.1bn, down 17% from 2008.

The fourth quarter results complete a financial year that saw Microsoft’s annual revenue drop for the first time since the company became public in 1986.

The departments responsible for Windows, Office, Xbox 360, web advertising and Microsoft’s server software group all posted a decline in sales.

The results come as a surprise to some market analysts as they are worse than expected.

After the fiscal results were announced yesterday (23 July), Microsoft’s shares fell by more than 7%.

Despite the poor results, Microsoft was able to realise many of its cost-cutting initiatives. Chris Liddell, Chief Financial Officer at Microsoft, said: “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”

One of the cost-cutting measures implemented was job cuts. In January, the company announced that it would slash up to 5,000 jobs over the next 18 months, as well as releasing 1,400 employees with immediate effect.

Microsoft is set to launch its new operating system Windows 7 this autumn, which will prove to be a crucial test for the company. People buying computers with a Vista operating system now will get free upgrades to Windows 7 in October, deferring roughly $276m of Windows revenue.