Software king of the world Microsoft's quarterly profit fell a greater-than-expected 22 percent, as sales of computers running its Windows operating system fell.
While a slow down had been expected as customers delay buying PCs until Windows 8 comes out, the sharp decline surprised investors.
Microsoft's shares fell 1.3 percent in after-hours trading.
Trip Chowdhry, analyst at Global Equities Research told Reuters that the macro conditions certainly deteriorated and no tech company will be immune to it.
Sales of PCs are expected to fall this year for the first time since 2001, according to research firm IHS, due to the weak economy, as we reported earlier in the week.
Microsoft is hoping that its touch-friendly Windows 8 will improve sales of PCs, laptops and Windows-compatible tablets. This will not only bring in more cash, but it will break Microsoft's heavy reliance on PC sales for profit.
Microsoft Chief Financial Officer Peter Klein said he did not control the macro-environment, but there's a huge opportunity in the explosion of devices.
Microsoft's fiscal first quarter profit fell to $4.47 billion, or 53 cents per share, from $5.74 billion, or 68 cents per share, in the year-ago quarter.
Sales fell eight percent to $16.01 billion, largely caused by the dip in demand for personal computers running Windows.
The biggest problem was that Microsoft's deferred some $1.36 billion in revenue, chiefly from its Windows unit, which it will regain next quarter after Windows 8 is launched.
Analysts had expected sales of $16.4 billion.
One bright spot was that Microsoft's fast-growing server and tools business posted a 12 percent jump in operating profit to $1.75 billion.
The online services unit, which includes the Bing search engine and MSN portal, lost less cash this quarter as it increased its share of the search advertising market and cut costs.