Microsoft and IBM last night made downbeat forecasts for the hi-tech market in the coming year.

Both companies reported a decline in earnings for the most recent quarter due to continuing slow personal computer sales. Microsoft posted a profit of $2.28bn (£1.6bn) for the second quarter, down from $2.6bn a year ago, while IBM reported a 12% drop in earnings to $2.33bn during its fourth quarter.

IBM said it would meet analysts' expectations for the coming year but only after cutting out $2bn of costs.

The figures were in line with most analysts' estimates but the comments on future trading depressed the shares of the two companies in after hours trade.

"While we are pleased with our results this quarter, we are concerned about the health of the global economy and have yet to see a recovery in many of the world's largest markets," said Microsoft's chief financial officer John Connors.

IBM reported a 24% drop in hardware sales during the quarter to $8.7bn. Finance director John Joyce said it had been a "tough year". For the full 12 months, IBM reported a dip in profits from $8.1bn to $7.7bn, and a 3% slide in revenues to $86bn.

Earlier, an email from Microsoft founder Bill Gates had come to light telling staff that the company needs to make itself appear more "trustworthy". The memo from Mr Gates was sent to staff on Tuesday following a series of embarrassing breaches of security in Microsoft software.

Security, Mr Gates said, was to take precedent over the development of new features.

Commentators have described security as the company's achilles heel and the issue has become of increasing concern as the internet becomes more ubiquitous, exposing the software group to hackers and viruses.

The company plans to trawl through all of its Windows operating systems in an effort to find any security flaws that may exist.