MicrosoftMicrosoft's (MSFT) fiscal first-quarter earnings jumped 51% as the world's largest software maker boosted sales of its Office 2010 product and grabbed share in the videogame-console market. Shares rose in after-hours trading after earnings and revenue both beat analyst estimates.

Net income for the quarter ended Sept. 30 was $5.41 billion, or 62 cents a share, up from $3.57 billion, or 40 cents, a year earlier, Microsoft said in a statement Thursday. Revenue rose 25% to $16.2 billion. Microsoft was expected to earn 55 cents a share on $15.9 billion in sales, according to a Thomson Reuters poll of analysts.

Office on the Upswing

Microsoft saw sales accelerate for Office 2010 during the productivity suite's first full quarter of sales, and boosted sales of its Xbox videogame console from a year earlier by 38%, the company said Thursday. Overall, sales from Microsoft's entertainment-devices division surged 27% from a year earlier after the company sold 2.8 million Xbox consoles.

"Consumers continue to show their strong preference for Windows 7 and Office 2010," Microsoft CFO Peter Klein said on a confernce call with analysts Thursday afternoon. "We're pleased with the results we delivered this quarter."

Sales growth from Microsoft's Windows operating system, which the company regards as a primary profit driver, was more restrained. Revenue from sales of Windows products to computer makers increased 11% from a year earlier, which was consistent with personal computer unit growth of about 15% for businesses and almost 10% for consumers, Microsoft spokesman Bill Koefoed said on today's call.

Klein added that Windows revenue for the upcoming quarters will grow "roughly in line" with personal computer sales growth, though sales will be helped by the Nov. 8 U.S. launch of Windows Phone 7. Earlier today, CEO Steve Ballmer, speaking at the company's Professional Developers Conference at its Redmond, Wash., headquarters, said its the mobile operating system will boost sales as the mobile operating system is employed a variety of smartphones that will appear later this year.

Tablet Trouble?


The company may face an upward battle in this arena, however, especially as Apple's iPad leads a rapidly-growing tablet-computer market that is expected to double in sales during each of the next few years. In its September mobile OS report, Gartner said it expects Microsoft's worldwide market share to rise to 5.2% next year, from 4.7% at the close of this year. But by 2014, Gartner expects Microsoft's share to fall to 3.9%. Gartner projects that the overall pie will get bigger, but Microsoft will not be able to hold onto its slice.

More specifically, Microsoft's smartphone operating-system share has been pummeled by Google's (GOOG) Android, with Microsoft's share falling to 5% in the second quarter compared with 9.3% a year earlier, according to Gartner.

The company downplayed the effect of tablet-computer growth on operating-system demand.

"We have not seen a material shift away from low-end PCs," Koefoed said on the call.

Last week, Microsoft said Ray Ozzie, who took over the chief software architect post at the world's largest software company from company founder Bill Gates in 2006, would step down after five years with the company. The same day, Apple (AAPL) said earnings surged 70%, largely on sales of its iPhones and iPad tablet computers.

Microsoft shares advanced 3.4% to $27.17 at about 6:40 p.m. Eastern time after rising 0.9% in regular trading Thursday.


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