Microsoft sales fell this year for the first time in the company's 23-year history, but some analysts have expressed their relief the quarterly results were not even worse.
Sales revenue for the three months ending in March was down six per cent to $13.65 billion (£9.33 billion) compared with the same period last year.
Microsoft has grown to be the biggest software company in the world since it became going public in 1986, due largely to the popularity of its Windows operating system.
But these unprecedented results reflect cautious consumer spending as the global recession worsens.
Overall profit fell 32 per cent to $2.98 billion (£2 billion), with the falling sales compounded by $290 million (£198 million) paid out in severance packages.
Microsoft announced 5,000 job cuts in January this year, 1,400 of which were lost immediately.
Chris Liddell, Microsoft's chief financial officer, said: "While market conditions remained weak during the quarter, I was pleased with the organisations ability to offset revenue pressures with the swift implementation of cost-savings initiatives.
"We expect the weakness to continue through at least the next quarter," he added.
But Goldman Sachs software analyst Sarah Friar told the Seattle Times the results were not as bad as they could have been.
She said: "Expectations have gotten so low that people expected the worst, and they got something that was more in line.
"In line is good when you thought it was going to be a lot worse."
Microsoft confirmed that despite the results, they still planned to release the Windows 7 system in the next financial year.