Poor PR surrounding Windows, depressed PC sales and a chill in the online ad market hurt Microsoft profits in the period ending December 31.

In toto, sales rose 1.6% year-over-year (YOY), to $16.63 billion, in Microsoft's fiscal second quarter; but profit fell 11.3% to $4.17 billion. Earnings per share slid 6% to $0.47.

"Our second-quarter results reflect the difficult environment as the global economy continued to deteriorate beyond our expectations, particularly during the month of December," CFO Chris Liddell stated somberly.

Windows was hardest-hit, with sales down 8% to $4 billion.

Microsoft's Business Division, which oversees Microsoft Office, saw a modest sales increase of 1.9% to $4.9 billion. Overall, consumer sales of Office fell 23%, riding overestimated PC sales.

CEO Steve Ballmer remained brazenly optimistic, acknowledging Windows lost "maybe a point of [market] share," but adding that "the kind of price premiums that people pay for Macintoshes vs. PCs, I think, will be looked at far more critically by customers."

Despite said premiums — and news of the waning health of its own CEO — rival Apple's Mac shipments increased 9% last quarter.

Xbox 360s saw a brisk business, selling a record six million in the quarter — but increasing revenue by just 3%, to $3.2 billion. Servers and Tools maintained healthy growth, with sales rising 15% to $3.7 billion.

Online Services, which oversees MSN, online advertising and search, suffered a profit decline of $224 million in the quarter, alongside Entertainment and Devices.

MSFT stock plunged 11.7% to $17.11 after earnings were released — its lowest point since January 30, 1998, the Seattle Times reports. An internal email leaked yesterday also revealed Microsoft plans to cut 5000 jobs over the next year and a half, mostly in the R&D, marketing, sales, finance, LCA, HR and IT departments.