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Microsoft Defines Waiting Game

NEW YORK ( TheStreet) -- No tech company defines the waiting game better than Microsoft (MSFT - Get Report).

The Redmond, Wash. tech giant, on deck to report fiscal third-quarter earnings after the bell Thursday, is likely to repeat the same pattern spun out over the past five or so quarters: A post of solid top- and bottom-line growth, followed by a drop in stock price that lasts for at least a few days.

While some analysts say that investor patience is about to pay off, a lasting pop in Microsoft's stock won't likely hit until the firm shows tangible evidence of overcoming the two big problems perceived by investors: A (tablet?) plan to offset what could be long-term softness in the consumer PC sector and doing a better job of catching up to rival mobile OS brands like Apple (AAPL) and Google (GOOG).

Despite solid reviews of phones running it, Windows mobile has fueled uneasiness in investors, due partly to the company's reticence regarding just how many Windows Phone 7 handsets have been activated by consumers. In January, Microsoft said that it had shipped 2 million of its phones through December -- to retailers.

"Windows Mobile may be a touchy subject [in this report] given the company's sales claims, which seemed to reflect copies shipped more than actual copies sold," Charles King, principal analyst at tech research shop Pund-IT, said in an email to TheStreet. While Apple and Google regularly supply the numbers of new phones running their software, Microsoft has so far demurred.

"Windows Phone 7 is off to a solid start," Bill Koefoed, Microsoft's investor relations chief, said on the conference call with analysts last quarter. He noted that the firm has signed up 24,000 developers to build out the system's apps menu, but that didn't give any sort of picture of Windows Phone 7's reception with consumers or enterprise users.

Hope for Microsoft and mobile lies in its just-inked partnership with the world's largest smartphone player Nokia (NOK), which will see Windows Phone 7 as the primary operating system for its handsets coming sometime in 2012. Research firm Gartner even predicts that the deal will propel Microsoft from its current fifth place to second in smartphone OS market share -- five years from now.

The PC Market Conundrum

Despite recent research that worldwide PC shipments are falling -- Gartner reported a decline in PC unit growth of about 1.1%, while IDC posted a 3.2% decline -- Intel's (INTC) robust results last week painted a different picture: Its PC client group registered a 17% year-over-year increase in sales. That's positive news for Microsoft and its core Windows market, where continued enterprise PC spending should offset consumer weakness.
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