Microsoft's Windows division revenue dropped six per cent, the Redmond giant revealed in its second quarter results.
The company's Windows and Windows Live Division posted revenue of $4.74 billion (3 billion), as overall profit dipped slightly from $6.63 billion a year ago to $6.62 billion.
This was despite the company seeing revenue jump five per cent year-over-year.
Microsoft blamed the poor Windows results on the Thailand floods, which has hampered PC manufacturing, as well as competition from different form factors such as tablets.
We're seeing very positive reviews for our new phones and PCs.
The tech giant had seen declining Windows sales figures until the last quarter, when they increased by just two per cent.
"We delivered solid financial results, even as we prepare for a launch year that will accelerate many of our key products and services," said Steve Ballmer, chief executive officer at Microsoft.
"Coming out of the Consumer Electronics Show, we're seeing very positive reviews for our new phones and PCs, and a strong response to our new Metro style design that will unify consumer experiences across our phones, PCs, tablets, and television in 2012."
The company will be hoping Windows 8 will revive operating system profit when the OS is released later this year.
Improvements
There were a number of high points from Microsoft's figures, in particular from its cloudy products, as its business division reported a three per cent increase in revenue.
Revenue from Lync and Dynamics CRM grew by over 30 per cent, whilst Microsoft's server business posted an 11 per cent rise.
Over 100,000 businesses have committed to its online services, according to Microsoft. There were no official figures on penetration of the company's Platform-as-a-Service offering Azure or Office 365, however.
"We saw strong demand for our business products and services, despite the soft PC market and continuing economic uncertainty in key parts of the world," said Peter Klein, chief financial officer at Microsoft.
Meanwhile, the company's online services division continued to turn a corner, posting a 10 per cent revenue increase year-on-year. Bing organic US market share grew to 15.1 per cent.
The division has been losing Microsoft a significant amount of money, but in the previous quarter it appeared things were turning around when it lost $494 million in the quarter, the lowest loss in the last seven quarters.
