Weak PC Market Takes Toll On MicrosoftWeak PC Market Takes Toll On Microsoft

Microsoft's net income fell 13%, to $2.28 billion, during its second quarter ended Dec. 31, and the company says second-half earnings will fall short of analysts' predictions as PC sales continue to slump. That shows how dependent Microsoft (MSFT--Nasdaq) remains on PC software, which contributed nearly 65% of sales during the quarter, even as it focuses more on distributed Internet applications.

"The global PC market continued to deteriorate in the December quarter," CFO John Connors says. PC shipments dropped about 5% during the quarter, and the overall PC market is on track for a percentage decline in the mid-single digits this fiscal year. The company did benefit from retail sales of 17 million copies of Windows XP and 1.5 million units of its new Xbox video-game system. Revenue increased 18% to $7.74 billion.