Microsoft Comes Up Short

Microsoft late Thursday reported fiscal third-quarter earnings and sales that came up short of Wall Street estimates.

Microsoft’s earnings of 32 cents a share were a penny shy of estimates. Sales climbed 13% from the year-ago quarter to $10.9 billion, but analysts were looking for revenues of $11.04 billion.

Redmond’s June quarter guidance was also a little mixed. The company said it expects earnings of 30 cents a share on sales of $11.5-$11.7 billion, compared to 34 cent and $11.64 billion forecasts. Microsoft’s first peek at expected fiscal 2007 earnings and sales were better than expect on the top line ($49.5-$50.5 billion revenues), but lower than anticipated on the bottom line ($1.36-$1.41 earnings per share).

With analysts expecting a slowdown in PC sales ahead of next year’s release of Windows Vista and Office 2007, the lackluster results weren’t too much of a surprise. Microsoft shares traded down about 5% in after-hours trading.

Microsoft CFO Chris Liddell confirmed Wall Street’s view of the company’s prospects in a statement accompanying the earnings release: “We are now accelerating our investments in the business to drive future growth, which is reflected in our financial guidance. We believe next fiscal year will deliver even stronger double-digit revenue growth than this year.”

The quarter had its bright spots. Xbox 360 sales drove Home and Entertainment revenue up more than 80%. Microsoft Business Solutions delivered 21% revenue growth due to interest in Microsoft Dynamics business management solutions, and SQL Server sales surged 30% in the quarter.

Stocks rose during the day on congressional testimony from Fed Chairman Ben Bernanke that suggested the Fed may pause in its long rate-hike campaign. First-quarter GDP Friday morning will give investors another read on inflation.

The Nasdaq rose 11 to 2344, the S&P 500 gained 4 to 1309, and the Dow rose 28 to 11,382. Volume rose to 2.82 billion shares on the NYSE, and 2.62 billion on the Nasdaq. Advancers led 16-15 on the NYSE, while decliners led 16-13 on the Nasdaq. Upside volume was 51% on the NYSE, and 62% on the Nasdaq. New highs-new lows were 167-138 on the NYSE, and 164-54 on the Nasdaq.

Intel rose on cost-cutting plans.

Avaya , Amkor , Comcast , LSI , Netgear , Photon , Sohu and Xilinx rose on their results.

Alcatel , Business Objects , Komag , Orckit and Redback fell on their earnings reports.

NetIQ jumped on a buyout offer.