Microsoft's Mixed Bag Miffs Investors

SAN FRANCISCO -- Microsoft's(MSFT Quote - Cramer on MSFT - Stock Picks) third-quarter results -- and its updated forecast -- failed to live up to the Street's high expectations Thursday.

The Redmond, Wash., software company said revenue for its third quarter was flat at $14.45 billion, vs. $14.4 billion in the same quarter of last year. Analysts were expecting $14.5 billion, according to Thomson Financial.

Net income fell 11% to $4.39 billion, or 47 cents a share, from $4.93 billion, or 50 cents a share, in the year-ago period. That did beat analysts' EPS expectations of 44 cents.

Shares of Microsoft were down $1.50 or 4.7%, to $30.30 in recent after-hours trading.

For the fourth quarter, Microsoft said revenue would range from $15.5 billion to $15.8 billion. EPS will be 45 cents to 48 cents. Analysts were projecting a top line of $15.56 billion and EPS of 48 cents.

For the next fiscal year, the company projected revenue ranging from $66.9 billion to $68 billion and EPS of $2.13 to $2.19. Analysts were expecting revenue of $66.5 billion and EPS of $2.10.

The company's server and tools division, which released several upgrades during the past two quarters, reported third-quarter sales up 18% year over year to $3.26 billion.

In server software, Microsoft competes for market share against Oracle(ORCL Quote - Cramer on ORCL - Stock Picks) and IBM(IBM Quote - Cramer on IBM - Stock Picks), as well as open-source providers Red Hat(RHT Quote - Cramer on RHT - Stock Picks) and Novell(NOVL Quote - Cramer on NOVL - Stock Picks).