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While overall growth was 2%, Microsoft took a big hit with its client software, and a big reason for that was netbooks. Here's what the company said:
Client revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks.
That's an astonishing admission. It means that people are forgoing higher-priced laptops, and instead buying netbooks --- and many of those netbooks are powered by Linux. So Microsoft loses out not only on sales of Windows, but also sales of Microsoft Office as well. Estimates are that 30% of all netbooks ship with Linux.
This is all the more reason why Microsoft needs to ship Windows 7 quickly, and will most certainly do it before the announced 2010 ship date. Windows 7 has been designed to work with netbooks, and Microsoft hopes it will be a Linux-killer.
To see why I think that Windows 7 will, in fact, help beat back Linux, see my blog post, "Which is best for netbooks: Windows 7 or Linux?"