Google wasn’t the only tech giant to disappoint investors yesterday. Microsoft posted a 22 percent drop in earnings for its third quarter.

Smartphones and tablets are taking a serious bite out of demand for regular old personal computers. Research firm IHS predicts PC sales will fall this year for the first time since 2001. The sluggish global economy isn’t helping, and tech analyst Carl Howe, with Yankee Group, says PC fans may have been reluctant to buy a new computer before Microsoft’s Windows 8 comes out next week.

Microsoft is also launching its own tablet computer — the Surface. Howe says Microsoft is pegging its future to the tablet market. Accordingly, the new operating system is touch-screen friendly.

“The tablet platform is a key initiative for Microsoft. If it doesn’t succeed there, there’s no place to point to say ‘Oh that’s the big new future for Microsoft.’ This is a bet-the-company initiative,” says Howe. 

Microsoft is hoping Windows 8 will boost PC sales too. The company says there’s more demand now than there was before its last Windows launch in 2009.