Updated from Jan. 25

Microsoft ( MSFT) beat Wall Street's second-quarter estimates, while delivering investors a nice windfall in the form of higher-than-expected deferred third-quarter revenue.

Shares rose 2% Friday morning, as Citigroup raised its price target on the software giant to $33 from $30. Shares rose 60 cents to $31.05.

The company said Thursday it posted a profit of 26 cents a share on sales of $12.54 billion.

Analysts polled by Thomson First Call were looking for a profit of 23 cents a share on revenue of $12.08 billion.

Guidance for the rest of the year was generally in line with expectations, although Microsoft cut its forecast of cumulative Xbox 360 video-game console sales to 12 million by the end of June, down from earlier projections of 13 million to 15 million consoles.

Wall Street's reaction was positive but restrained. Shares of Microsoft were up 97 cents, or 1.7%, to $30.97 in after-hours trading.

Deferred revenue, a key metric, came in at $1.64 billion, above the company's earlier guidance of $1.5 billion, largely because the company offered customers coupons that will allow them to upgrade to new versions of Office and Windows when the products are generally available. The revenue represented by the coupons is on the second-quarter balance sheet and will move to the income statement in the third quarter.

As expected, the bigger deferred revenue balance hurt comparisons to last year's net income and revenue -- the coupon cost trimmed the bottom line by an estimated 11 cents a share -- but knowing the shift is an accounting effect and not a sales problem, Wall Street appeared to take the negative comparisons in stride.

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