Don't Be Confused About Microsoft: The News Is Bad

So now the world knows Microsoft's (MSFT Quote) quarterly results. And they were unimpressive for the greatest growth stock in history run by the richest man in the world. Revenues were flat. Operating earnings were down. Earnings per share met analysts' already lowered expectations.

Microsoft's sluggish numbers left investors decidedly downcast. After a brief pop in after market trading Tuesday evening, the stock slumped badly Wednesday and closed down 5 3/8, or 6.9%, at 73 1/8. Analysts at Prudential Securities and SG Cowen downgraded the stock from a buy to a hold. Other analysts held their buy recommendations but reduced their published estimates for growth in revenues, operating income and earnings per share (excluding investment gains).

Let's sift through the dross.

Revenues for the quarter were $5.8 billion, 1% higher than a year ago and 3% higher than last quarter. That is the kind of growth rate one would expect from a cigarette company. (In fact, Philip Morris (MO Quote) yesterday reported better revenue growth numbers than Microsoft!) ...