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The bottom line is MS broke a company record on full year revenue, met the lower end of Wall Street’s expectations and the company’s own guidance or missed it depending on whose version you accept. The stock price dropped 2% on the news and reports vary on analysis. For example, some reports credit Vista for the news while others say it is disappointing or dragging the company down.

A Dow Jones report at CNN, while explaining the numbers well, mentions support contracts resulted in gains that will show up later. But headlining that meeting expectations really isn’t meeting them is either not quite right or nothing new. If you track stocks with any regularity around the quarterly earnings releases, examples abound of surprises whose stock prices do not follow logic after earnings are announced.

XP is contributing more to MS revenue than they are willing to discuss. The opinion here is Vista is a bust. Xbox has caused serious money flowing in the wrong direction for MS on covering warranties to the tune of about 1 billion dollars. The browser wars continue and more difficulty with service pack issues, rumor or fact, and the curse of exploit vulnerabilities from the malicious hacker crowd have not diminished.

The real bottom line is Microsoft still sucks. You might want to read up on the gamer related stories on Peter Moore’s recent departure and the details behind it. This blog limits its coverage of MS news based on a bias against the company and an unwillingness to support it even by sharing the bad news. Is there any good news? Only for the wallets of some including Master of the Dark Side, Bill Gates.

Strong Microsoft results, but Vista sales lackluster
By Benjamin J. Romano
Seattle Times technology reporter
Microsoft’s $3.04 billion in net profit on $13.37 billion in revenue last quarter met Wall Street’s expectations, and the company had full-year revenue of more than $50 billion for the first time in its history.Beyond the big numbers, however, some analysts were underwhelmed by the financial performance of the company’s most important product: the new Windows Vista operating system.

“Vista appears to be disappointing,” said Israel Hernandez, analyst with Lehman Brothers, noting that revenue growth for the Windows Client division was below his expectations and at the low end of Microsoft’s previous guidance.

The article above points to Vista as disappointing while the one below credits the really SOFTware for improved sales. Go figure, even MS talked down the disappointment of Vista, so read a variety of sources to find the facts.

Vista drives sales at Microsoft
Software giant tops $50bn in annual revenue for the first time
Dave Friedlos,
Computing 20 Jul 2007
The strong results have come despite costs stemming from repairs to its Xbox 360 computer console. Microsoft is facing a bill of more than $1bn (£487m) to cover the cost of offering extended warranties to console owners.Sales were driven primarily by consumer purchases of new flagship products Windows Vista and Microsoft Office 2007, says chief operating officer Kevin Turner.

The article below is the one with reference to MS’s own appraisal of Vista muttered with hand over mouth.

Microsoft grows despite Windows Vista
By Gavin Clarke in San Francisco
Published Friday 20th July 2007 01:03 GMT
Not that you’d know it from Microsoft’s results, or projected revenue, but the giant launched a brand-spanking new version of Windows this year.Not only did Windows Vista - billed by Microsoft as its biggest operating system for 10 years - fail to distinguish Microsoft’s latest fiscal year from previous, non-Windows-Vista years, but Microsoft also missed its own expectations by several million dollars.

With the “wow” clearly failing to materialize in fiscal 2007, Microsoft was left to pronounce itself “broadly happy” - not blown away - with Windows Vista sales.

The reference below is the one claiming surprise on meeting expectations but taking a hit on stock price. A stock move in the opposite direction of earnings reports is not as peculiar as the author from DJ would have you believe.

For Microsoft, Meeting Expectations Apparently Not Enough
Dow Jones
July 19, 2007: 10:20 PM EST
SAN FRANCISCO -(Dow Jones)- In the technology sector currently, meeting expectations doesn’t really meet expectations.Microsoft Corp. (MSFT) saw its stock price drop 2% in after-hours trading Thursday, despite posting quarterly earnings exactly in line with expectations and raising guidance for the current year.

“People were expecting personal computers to drive more upside. The whole PC demand picture has looked better,” said Brendan Barnicle, an analyst with Pacific Crest Securities.

Higher PC sales did help Microsoft, too, said Barnicle, though much of the extra revenue wasn’t recognized in the quarter, instead showing up as deferred revenues under renewed support contracts.

Other MS news:

E3 Interview: Peter Moore Talks Xbox One Last Time
By Chris Kohler July 20, 2007
The last in Game|Life’s series of E3 interviews is with Microsoft’s Peter Moore, corporate vice president of the interactive entertainment business. For now, that is. Earlier this week — days after this interview was conducted at E3 — Microsoft announced that Moore would be moving to Electronic Arts, where he will become President of EA Sports.

Microsoft denies Vista SP1 rumour
10:59AM, Friday 20th July 2007
Microsoft has quashed internet rumours that the first service pack for Vista is set for an early arrival.After reports that Microsoft would be delivering the first service pack for Windows Vista as early as this week, the company has issued a statement that firmly closes the door on that possibility.

Mozilla patches Firefox, slams door on IE zero-day bug
We fixed our end, says Mozilla, but IE is still buggy
Gregg Keizer
July 18, 2007 (Computerworld) — Mozilla Corp. late yesterday patched Firefox to fix nine bugs, including the controversial critical vulnerability that involved both the open-source Web browser and Microsoft Corp.’s Internet Explorer (IE).

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