Microsoft revenue, profit and shares plunge.

Microsoft revenues for the last quarter fell sharply, with the company blaming poor global PC and server demand.

The announcement of a 17% fall in revenues saw their shares fall a dramatic 8%. Profits for the quarter remain high at $3.045 billion, but are down from $4.297 billion from the same period last year.

Sales of Microsoft’s Windows software dropped 29%, after the PC market contracted for three straight quarters. Some customers are holding off purchases until a Windows 7 comes out in October. Demand for Office software and advertising on Microsoft’s Web sites also waned.

To slash costs, Microsoft announced the first job cuts in its history in January, eliminating about 5,000 positions. The company also delayed opening new offices, eliminated video-game and phone software, cut travel and lowered pay for contract workers.

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Yahoo shares on the other hand were up about 2.5% as investors eye the possibility that the company could soon strike a search deal with Microsoft.

According to CNet’s sources however, we’re unlikely to see an announcement of an increasingly likely deal this week.

{reuters}