Slow Windows 8 uptake hits Microsoft

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　　Microsoft has given the strongest signal to date of a change of heart over its new Windows 8 operating system, as it revealed that the weak response to the software had wiped out underlying growth in its core business in the third quarter ended March.
　　The world’s biggest software company vowed to “respond to customer feedback” when it releases a new version of Windows, codenamed Blue, later this year. Peter Klein, outgoing chief financial officer, also said that Microsoft was working with hardware makers to come up with smaller, cheaper PCs, in an effort to overcome some of the biggest drawbacks of Windows 8 machines.
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　　The new operating system has been widely panned for its new user interface, which does away with the familiar “start” button at the bottom left of PC screens and introduces a new screen of tiles in place of the familiar desktop when the machine is turned on.
　　A slump in PC sales in 2013 has also highlighted the price and technology disadvantages of PCs as buyers turn to cheaper tablets with touch screens and longer battery life.
　　Announcing earnings, Mr Klein stopped short of promising a return to the start button. But he made clear that Microsoft had heard the criticisms and that changes were coming to widen the software’s appeal.
　　“We are working closely with the [hardware makers] to help them take Windows 8 across different form factors,” he added, with smaller, cheaper machines a priority in the coming months.
　　The slow uptake of the new operating system and the slide in PC sales this year wiped out underlying growth in the core Windows division in the latest quarter.
　　Microsoft said that reported revenues from Windows had risen by 23 per cent to $5.7bn. But nearly $1.1bn of that came in the form of deferred revenues from previous periods, resulting in flat Windows sales, compared with the year before.
　　The figures underlined the slow start to the all-important Windows 8 cycle, which is central to Microsoft’s attempts to make its software more competitive on tablets and other touchscreen devices.
　　But despite the weakness in Windows, growth from the Office and the server and tools businesses enabled the company to lift underlying revenues by 8 per cent to $18.8bn, with earnings per share of 72 cents topping a Wall Street forecast of 68 cents.
　　Microsoft’s latest numbers included nearly $1.7bn of deferred revenues associated with new product launches, as well as a fine of $733m imposed by the European Commission for its failure to stick to the terms of an antitrust settlement involving Internet Explorer.
　　Microsoft said Mr Klein would leave the company at the end of its fiscal year in June, after four years as finance chief.