Microsoft Withstands the Knocks

Microsoft's(MSFT Quote - Cramer on MSFT - Stock Picks) fourth-quarter earnings report Thursday demonstrated that the software giant is firing on all cylinders going into fiscal 2008.

Strength across its business divisions and product categories led the company to raise fiscal 2008 EPS guidance by a penny on both the low and high ends of its range, to $1.69 to $1.73. First-quarter EPS is expected to be 38 cents to 40 cents.

On the strength of the past quarter, Goldman Sachs analyst Sarah Friar raised estimates on Microsoft on Friday, as the company moves into its seasonally strongest quarters with an outlook for revenue growth of 16% and 23% in the first and second quarters, respectively.

"Product cycles are just beginning to kick in, with Office 2007 and SharePoint Server lifting Business Division performance ahead of our estimates," Friar wrote.

"In the much-maligned Online Services Business, advertising revenue growth of [greater than] 30% was a welcome signal that the company may finally be on surer footing here," said Friar, whose firm does investment-banking with Microsoft.

The stock was down 51 cents, or 1.6%, to $31 in recent trading.

The company reported net income growth of 7.3%, while cash flow from operations was up 34%, to $4.4 billion.

That difference was largely attributed to a $1.16 billion lower cash outflow for other assets in 2006 from ordinary Xbox expenses, according to the company. With core bookings up more than 20% and all bookings up 15%, unearned revenue -- net of unearned revenue recognized during the quarter -- was up $281 million, or 14%, year on year.

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