For the first time in their 23 year history as a public company Microsoft saw a decline in sales. Sales dropped 6% from last year to $13.7 billion, which fell short of analysts expectations of $14.1 billion. Total net income for the company fell by a staggering 32% to $2.98 billion.

Microsoft estimates PC sales may be down by as much as 7 to 9 percent, and people are opting to purchase cheaper netbooks rather than notebooks and PCs. While a Microsoft operating system, usually Windows XP, is available on most netbooks the company does have competition from Linux based netbooks and could face increased competition if Google's Android OS makes its way to the platform.

Microsoft cut 1,400 jobs during the quarter, another first for the company. They expect they will have to cut another 3,600 jobs by mid-2010.

The news wasn't all bad for Microsoft, the company's server business saw a 7% rise in revenue and a 24% increase in earnings.

Other notes from Microsoft's financial report:

• Entertainment and devices division (Xbox 360 and Zune) had a 2% revenue decline and an operating loss of $31 million from the same time last year.
• Sales in the business division dropped 5%.
• Sales in the division that produces Vista fell 16%
• Online Services division lost $575 million in the quarter, and sales dropped 14% from the same time last year.