Microsoft Looks Mighty

But don't count out continued upside from client software. Corporate IT departments have been sitting on the fence, waiting for either the distribution of Vista's Service Pack 1 -- its package of post-release patches and updates -- or just a good reason to commit entire companies to upgrades.

However, Microsoft has been reading the tea leaves and says tech managers are about to jump in.

Looking at its unearned revenue balance for the quarter, Microsoft saw that client volume licensing -- or corporate sales of Windows and Office 2007 -- jumped 27%. "That is a very good leading indicator from our point of view" that businesses are starting to buy Vista, said Liddell.

Since Microsoft relented to customer demand and offered an upgraded Windows XP operating system, customers chose Vista 65% of the time over XP, according to Liddell. The company sold 85 million copies of Vista during the quarter, compared to 45 million for XP.

But the real good news on the client software side is what Microsoft calls its premium mix. Premium versions of Vista command higher prices. That mix, or ratio, was 75% for premium vs. basic editions in the quarter. That's a big leap from the 59% mix a year ago.

While preference for premium editions is stronger among consumers than corporations, home editions carry lower price tags. Business premium editions have a 5-to-1 "pricing impact" over consumer premium editions, said Colleen Healy, manager of investor relations. That means business premium editions may sell more slowly, but they rake in a lot more cash.