SEATTLE - Microsoft Corp reported a dip in quarterly sales of its core Windows operating system, mirroring a recent downturn in personal computers and sending its shares down slightly.
The world's largest software company met Wall Street profit estimates after strong sales of its Office suite of applications and Xbox game systems took up the slack.
But its stock has waned in past weeks, spooked by a dip in PC sales -- which generate most of its revenue - and by fears the Apple Inc iPad and other mobile devices will eventually erode the PC business.
Microsoft's shares fell 1.2 percent to $26.37 in after-hours trading following the earnings report on Thursday.
"Microsoft to me is no longer a growth stock, but it is a very attractive value stock. They continue to generate tremendous free cash flow. Their balance sheet is really unmatched," said Channing Smith, co-manager of the Capital Advisors Growth Fund.
"What you will begin to see is a shift away from growth investors. You are seeing that transition where Microsoft is in no man's land, but I think they will become increasingly more attractive to value investors."
Microsoft has sold a record-breaking 350 million licenses for its Windows 7 operating system since launching it 18 months ago, but demand appears to be waning in an uncertain economy.
PC sales - the engine guiding Microsoft's financial success -- fell 1 percent in the first three months of the year, according to one research firm.
CFO Peter Klein told Reuters in a phone interview the company expects corporate spending on PCs to outpace consumer PC sales through the next 12 months. He acknowledged that sales of low-end netbooks were suffering particularly, partly because of the success of tablets and other mobile devices.
"The concern is PC markets are being disrupted. There's some validity," said BGC Financial analyst Colin Gillis. "But it's also overblown when you factor in that Windows 7 is the fastest-selling OS in history."