Microsoft on a Roll

Bigger revenue lets Microsoft do what Tracy called interesting things. "It allows us to invest in areas that can drive future growth. It allows us to take cash flow from the company and purchase shares back." Microsoft bought back $6.7 billion worth of its stock in the market last quarter alone.

The guidance for next year's profit was a little less optimistic, but still above analysts' consensus. Microsoft is looking for diluted EPS between $1.68 and $1.72.

The middle of that range, $1.70, is one cent above the $1.69 EPS that analysts are forecasting for fiscal 2008. It's also in the higher end of the $1.57-to-$1.75 range of the 35 analysts surveyed by Thomson Financial.

For the fourth quarter, however, Microsoft's guidance is weaker than what the Street had expected. It's expecting to earn 37 cents to 39 cents a share on revenue of $13.1 billion to $13.4 billion.

Analysts were expecting the company to earn 40 cents a share on revenue of $13.3 billion. In its conference call, Microsoft said the lower guidance is driven by a shift in operating costs to the quarter and higher costs expected from retail sales of Windows Vista.

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