Microsoft, Sun Fail to Inspire

Microsoft and Sun delivered quarterly results late Thursday that weren’t quite everything Wall Street analysts were looking for, but shares of both companies fared well under the circumstances.

Microsoft’s September quarter sales rose 11% to $10.81 billion, beating $10.75 billion estimates, and earnings of 35 cents a share were four cents better than anticipated.

But December quarter guidance of $11.8-$12.4 billion was well under $12.94 billion estimates due to $1.5 billion in revenue deferrals related to the delay of Vista and Office 2007. However, investors shrugged off the weaker than expected guidance under the assumption that next year’s Vista and Office launches will reinvigorate sales.

SQL Server and Xbox 360 sales were particularly strong in the September quarter, and Microsoft said it “has made considerable progress toward delivering two highly anticipated products to customers with the forthcoming releases of Windows Vista and the 2007 Microsoft Office system.”

Microsoft shares edged higher in after-hours trading.

Also after the close, Sun shares were little changed on sales that rose 17% to $3.19 billion, just under $3.2 billion estimates, according to Thomson Financial. The company narrowed its loss to $56 million, or 2 cents a share, beating estimates of a four-cent loss.

Sun attributed its growth to acquisitions and “increasing acceptance of the Solaris 10 Operating System, as well as growth in the services business. Computer Systems Products revenues increased 15 percent year over year.”

“It’s great to grow faster than the competition, maintain strong gross margins and see continued adoption of Solaris on HP, Dell and IBM computers,” CEO Jonathan Schwartz said in a statement.

Sun’s forecast for the December quarter of “high single-digit” sequential growth appeared to be a little below $3.52 billion estimates.

Microsoft and Sun might not move the market much on Friday, but third-quarter GDP might. Economists believe economic growth slowed to 2.1% in the quarter. Stocks rose ahead of that report Thursday, with the Nasdaq hitting a new five-year high.

Sprint , Business Objects , LSI , TeleTech , PC Connection and Harmonic gained on their results, while Symantec , Ariba and NetLogic fell on their numbers.

Red Hat plunged 24% on competition from Oracle .

Kanbay jumped on a buyout offer.

The Nasdaq surged 22 to 2379, the S&P 500 rose 7 to 1389, and the Dow gained 29 to 12,163. Volume declined to 2.74 billion shares on the NYSE, and rose to 2.44 billion on the Nasdaq. Advancers led 22-10 on the NYSE, and 20-9 on the Nasdaq. Upside volume was 65% on the NYSE, and 71% on the Nasdaq. New highs-new lows were 398-13 on the NYSE, and 235-48 on the Nasdaq.