Microsoft Motors Along

Updated from 5:40 p.m. EST

Microsoft(MSFT Quote) grew revenue by 9% during its fiscal second quarter to a record $11.84 billion, but still fell a bit shy of Wall Street's expectations and didn't deliver any of the earnings upside that some were hoping for.

The world's largest software company posted a profit of $3.65 billion, or 34 cents a share, including a 1-cent-a-share tax benefit, which equaled the 33-cents-a-share consensus of analysts polled by Thomson First Call. Analysts were looking for sales of just under $12 billion.

Operating income in the quarter dropped by 2% to $4.66 billion, reflecting heavy investments for the company's new line of products, Microsoft said after the closing bell Thursday.

Guidance for the current, or third, quarter is for sales ranging from $10.9 billion to $11.2 billion with diluted EPS of 32 cents or 33 cents. Analysts were projecting a 33-cent-a-share profit on sales of $10.99 billion.

"Overall, we're happy with this," said Pat Becker Jr., portfolio manager for the $2.5 billion Becker Capital Management, noting that the midpoint of the company sales guidance is above analysts' estimates. Becker, whose company holds shares of Microsoft, said he had been concerned that sales could fall off if customers decided to postpone purchases until after the debut of the company's new version of Windows. But that didn't happen.

Since expectations for the quarter had been muted, the modest upside was enough to spark a small after-hours rally that pushed shares up 60 cents, or 2.3%, on Instinet.

As expected, sales of the Xbox 360 were lower than Microsoft had hoped -- 1.5 million through the end of the quarter -- and the shortfall accounted for the revenue miss. But a third manufacturing partner will come on line next month and Microsoft still expects to ship 4.5 million to 5.5 million consoles by the end of the fiscal year in June.