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Company’s revenues and profits rise but are eclipsed by those of main rival as PC market shows signs of decline Microsoft’s quarterly profits and revenues were eclipsed for the first time in 20 years by Apple as a slowdown in the PC business and continuing huge losses in its search division held it back. Though the company reported net income up 30% to $5.2bn (£3.1bn) from $4bn, and revenues up 13% to $16.4bn from $14.5bn, both were smaller than figures released by Apple last week showing $6bn profits on revenues of $24.7bn. The overshadowing of Microsoft’s financial might by Apple will be seen by some as marking a key moment in the industry, as Apple’s iPad tablet computer and iPhone smartphone have both become important sources of revenue even while its desktop and laptop computers – the areas where Microsoft dominates – have become less important. Microsoft overtook Apple in profits in 1991, and revenues in 1995. But since the launch of the iPhone in 2007 and then the iPad in 2010, Apple has grown rapidly, and its market capitalisation overtook Microsoft’s in May 2010 . Microsoft’s dependence on the PC industry, which recorded a surprise year-on-year fall in sales during the first quarter, means that its profits from Windows licences, which generate roughly half its profits, are vulnerable to any slowdown. Analysts believe that the iPad and other tablets using Google’s Android software are eating into Microsoft’s PC business, and have not seen any convincing response from the Redmond-based giant. Sales of its Windows Phone have been unimpressive so far, and are not mentioned in the formal earnings announcement . Trip Chowdhry, managing director of Global Equities Research, said: “This is the best they can do in the industry they have. The quarter was almost in line. There is nothing to get excited about. But 2012 is going to be much weaker versus 2011. It’s all about innovation and the pace of innovation. The question to ask is: is there any product line in Microsoft that they are not playing catch-up on?” Colin Gillis, an analyst at BGC Financial, said: “The concern is PC markets are being disrupted. There’s some validity [in that]. “But it’s also overblown when you factor in that Windows 7 is the fastest-selling OS in history. There was $4.5bn in [Windows] revenue. You’ve got to put it in perspective. Tablets are not going to replace PCs. OK, they are definitely eating into laptops in some markets. But Microsoft will be in that game. You’re going to see Windows 8 come in September, that’s going to help offset the tablet concerns, because it’s going to run tablets.” Channing Smith of Capital Advisors Growth Fund said: “It’s hard to get excited about the Microsoft story when there are more exciting growth opportunities in the marketplace. With that said, Microsoft to me is no longer a growth stock but it is a very attractive value stock.” Search remains a source of financial pain for the company. Its Online Service division, which contains its search engine Bing, recorded a loss of $726m (previously $709m) on revenues of just $648m, up from $566m last year. By contrast Google’s latest quarterly results showed a profit of $2.3bn on revenues of $8.5bn – more than 10 times larger than Bing and its properties. The only other sources of encouragement were higher sales of Office, the company’s other established monopoly, which generated profits of $3.1bn on revenues of $5.2bn, and the Kinect games add-on, the fastest-selling consumer electronics device ever, which contributed to a 60% growth in its Entertainment and Devices division, which includes the Xbox 360 console. RIM, maker of the BlackBerry, slashed its quarterly profit and revenue forecasts from the already lower numbers given at its last quarterly results. It said phone shipments would be closer to 13.5m, and that more would be cheaper models. It cut its earnings forecast by 12%. Microsoft Windows Apple Technology sector Charles Arthur guardian.co.uk