- The better-than-expected level of deferred revenue is probably a harbinger of strong sales for the new versions of the company's cash cows -- Windows Vista and Office 2007.
- Microsoft did blow away its own projections for sales of the Xbox 360 game console, although there is confusion over the company's decision to cut sales guidance for the game console over the rest of the year .
- Sales of enterprise products, historically not the company's strongest suit, continue to improve, while the online unit is still underperforming.
Microsoft ( MSFT) didn't blow the doors off the hinges Thursday -- it didn't have to. The company's
solid second quarter answered the most important question facing it and set the stage for a slow but steady appreciation of the stock. Analysts looking at the quarter and the software giant's guidance for the rest of 2007 say the following:
Munster, whose firm has no investment banking relationship with Microsoft, was referring, of course, to the second stage of the Vista launch. Enterprise customers have been able to buy the software since late November; on Tuesday consumers will get a chance to buy the product at retail outlets and preinstalled on a huge percentage of new PCs sold worldwide.
Why the forecast was cut so sharply isn't clear, though CFO Chris Liddell made references to unsold Xboxes in the distribution channel and Microsoft's desire to make the entertainment unit profitable by 2008. Despite the lack of clarity, there was little indication that demand for the console is falling short, and the game unit's 75% rise in revenue was a pleasant surprise. Shortly after Thursday's earnings announcement, one buy-side analyst likened Microsoft's stock to an oil tanker -- slow to get moving, hard to stop. That tanker is moving, and there are no obvious icebergs in sight.