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4/29/2011
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Microsoft Sees Business PC Sales Up 9%

The need to replace aging machines and upgrade to Windows 7 drives uptick in corporate market.

Although the overall market for PCs is contracting amid competition from tablets and phones, sales of desktops to businesses were up significantly in the most recent quarter, Microsoft said in an earnings report.

For the three months ended March 31, business PC sales to enterprises and SMBs increased 9% worldwide, according to the company. "On the business desktop, customers continue to embrace our offerings," said Microsoft, on a conference call Thursday with analysts.

Industry watchers said the gain was driven by the fact that most companies are long overdue for new PC hardware because they held off on technological investments during the recession.

Sandeep Aggarwal, an analyst at Caris & Company and former strategic planner at Microsoft, said businesses typically purchase new PCs about every 36 to 40 months, but many have now stretched that out to 45 months or longer due to the economic downturn.

"There is a very aging population in the business installed base right now, that's what's driving the growth" said Aggarwal, in an interview. He estimates that the U.S business PC market grew about 6% to 7% in the quarter while emerging markets grew at about 11% to 12%.

Additionally, businesses are becoming sufficiently comfortable with Windows 7, which debuted in October 2009, to adopt it organization wide. "Enterprise deployments [of Windows 7 PCs] have more than doubled in the past six months," said Klein.

In many cases, that has required new hardware. "Most vendors aren't even shipping Windows XP anymore," said Aggarwal. Microsoft ended "mainstream" support for XP in 2009 and will terminate per-incident extended support in 2014.

The uptick in business purchases of PCs was not enough to offset a decline in the consumer market, where the iPad and Google Android tablets are capturing the buzz of late. Consumer PC sales fell 8% in the quarter, and sales of netbooks, in particular, were down a whopping 40%.

Microsoft shares were off 4.49%, to $25.51, in late afternoon trading Friday on investors' concerns about weakness in the consumer PC market.

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