"While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach," said Steve Ballmer, Microsoft's chief executive officer.
"We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today."
There was no announcement that Ballmer or other senior executives would be taking pay cuts to help contain costs or to reflect the fact that they will be managing fewer people.
But it's not all bad news. In a conference call to discuss the results, Ballmer said Microsoft will be "adding a few thousand jobs" in areas such as search where the company sees significant growth opportunities.
Microsoft shares opened 7 percent lower at $US18.02, and fell further to close at $US17.11 on Thursday, a total decline of 11.7 percent.