Weak PC Market Catches Up to Microsoft

On Thursday, the company missed Wall Street forecasts, blaming the declining PC market for the shortfall. Microsoft also acknowledged the disappointing sales of one of its most prominent products, its Surface RT tablet computer, by taking a $900 million charge to reflect unsold inventory of the device.

“It finally caught up to them,” said Colin W. Gillis, an analyst at BGC Partners. “We’ve been in a PC recession for five quarters.”

For the fiscal fourth quarter that ended June 30, Microsoft, which is based in Redmond, Wash., reported net income of $4.97 billion, or 59 cents a share, in contrast to a loss of $492 million, or 6 cents a share, in the period a year earlier. Last year, Microsoft took a $6 billion write-down on a soured acquisition, wiping out its overall profit.

In the latest quarter, revenue rose 10 percent, to $19.9 billion, from $18.06 billion a year earlier.

Those results fell well short of the average analyst estimates compiled by Thomson Reuters of 75 cents a share in earnings and $20.73 billion in revenue.

Revenue from Microsoft’s Windows business, which includes its Surface tablet computers, rose 6 percent, to $4.41 billion. But without including the favorable impact from an upgrade offer last year, Microsoft’s Windows revenue fell 6 percent in the quarter.

Last week, the research firm Gartner reported that global PC shipments declined 10.9 percent in the second quarter of the year, the fifth consecutive quarter of declining PC shipments, the longest ever.

Mobile devices have sapped much of the gusto out of the PC market. Many people are buying tablet computers, especially Apple’s iPad, instead of PCs to watch movies, surf the Web and write e-mails.

“We know we have to do better, particularly on mobile devices,” Amy Hood, Microsoft’s chief financial officer, said in an interview.

Ms. Hood said the company’s Windows business is a “tale of two markets,” one in which PC sales to businesses continue to grow modestly, while consumer demand for the machines is fizzling. She estimated that total industry PC shipments to the consumer market fell more than 20 percent during the quarter.

She said that a companywide reorganization that Microsoft announced last week was part of an effort to better position the business for big changes in technology, including the shift to mobile devices.

Until its most recent quarter, Microsoft showed a remarkable aptitude for finding ways to squeeze money out of its venerable business, despite the problems in the PC market. It did that through lucrative multiyear software contracts with corporate customers that tend to move far more slowly than consumers in adopting newer technologies.

Parts of Microsoft that cater more to businesses helped lessen the sting. Microsoft said revenue in its server and tools group rose 9 percent, to $5.5 billion. Revenue in its business division, dominated by the Office suite of applications, jumped 14 percent, to $7.21 billion. But the division grew only 2 percent without deferred revenue related to an earlier upgrade offer.

Office is under siege from a suite of online applications from Google and others, which has led Microsoft to adapt the software so it can be delivered as a service through cloud computing. Microsoft said that if Office 365, the version of its productivity applications that are offered as a service, were to perform for a full year at current levels, it would generate $1.5 billion in revenue.

“The consumer has voted,” said Barbara Coffey, an analyst at S&P Capital IQ. “I don’t know that enterprise has yet. We’ve seen such a big shift to tablets. Microsoft just doesn’t play in tablets at the same level that they do in PCs.”

Investors had become more bullish on Microsoft’s ability to navigate the disruption of the PC market, sending its shares up more than 32 percent this year. But after the release of its financial results, shares of Microsoft dropped more than 6 percent in after-hours trading. They ended regular trading at $35.44, down 30 cents.

Boeing 787 Catches Fire in London

It was not immediately clear what caused the fire or how serious the repercussions would be. But investors, mindful that hazards with the jet’s batteries had led to the grounding of the entire fleet from January to April, reacted nervously, sending Boeing’s shares down 4.7 percent.

Smoke came from the plane, named the Queen of Sheba, eight hours after it had been parked in a remote space at Heathrow and about four and a half hours before it was scheduled to depart for Ethiopia. No passengers were on the plane, which was connected to an external ground power source, according to people briefed on the incident.

It was also not clear if any maintenance was under way or how long the fire had been burning, though it was intense enough to burn through its carbon-composite skin on the top of the fuselage near the tail.

That area was not next to either of the plane’s new lithium-ion batteries, which caught fire or emitted smoke in two earlier incidents that led to the grounding of the first 50 787s. Unless they were charging, aviation experts said, the batteries would not have been in use if the plane were connected to ground power.

A team of British safety investigators began examining the plane shortly after the fire was put out. But no one involved — the investigators, Boeing, the airline or the airport — commented on the possible cause of the fire.

Other experts said that some of the plane’s wiring, and the oxygen systems for passengers, would have passed through the damaged area, which was above the rear galley. It was also possible the fire migrated from another part of the plane, they said.

Richard L. Aboulafia, an aviation consultant at the Teal Group in Fairfax, Va., said the possibilities ranged from “something pretty benign,” like a lit cigarette or a coffee machine left on, to a serious flaw in the plane’s new electrical system, which includes other innovative components besides the batteries. Or, he said, it could be something “not as easy or as terrible,” like a component that was installed incorrectly.

The Heathrow incident was not the only problem aboard a 787 on Friday. Thomson Airways, a charter airline, said that one of its Dreamliner planes traveling from Manchester Airport in England to Orlando-Sanford International Airport in Florida had to turn back “as a precautionary measure.”

The fire on the Ethiopian 787 forced Heathrow Airport to temporarily suspend arrivals and departures while fire crews responded to the incident at 4:36 p.m. local time. Once the fire was extinguished around 6 p.m., the runways reopened.

Friday’s incidents took place about two months after the 787 Dreamliners returned to the skies after being grounded over the battery problems. One of the new lithium-ion batteries caught fire on a 787 parked at a Boston airport on Jan. 7, and another began smoking in midflight nine days later, forcing a 787 to make an emergency landing in Japan.

Regulators lifted the grounding orders after Boeing came up with a plan to refit the first 50 to 60 of the new jets with more insulation between the battery cells and a new system for venting smoke or hazardous gases out of the planes. Ethiopian Airlines has four 787s, and the one that had the fire at Heathrow was the first 787 to return to service at any airline after the grounding ended.

Boeing said that while the planes were grounded, it also made changes in electrical components that had failed on occasion since the planes began to fly in late 2011.

At Heathrow, television video and photographs showed fire damage near the base of the vertical stabilizer, with fire-retardant foam having been sprayed on the area. That would be the first time a fire had burned through the 787’s carbon-composite skin, raising questions about its fire-retardant properties.