SAN FRANCISCO -- Microsoft (MSFT) shares were up Friday after posting impressive results for a second consecutive quarter.

Shares for the Redmond, Wash., software giant, which posted 50 cents a share in earnings in the second fiscal quarter, or 4 cents higher than analysts' estimates, were recently trading up $1.03, or 3.1%, to $34.28.

The stock has fallen some 7.5% since its Nov. 1 high of $37.06. But the stellar results have cushioned the stock from the market's excessive volatility. Over that same span, the iShares S&P GSTI Software Index ( IGV) has fallen 13% and the Dow Jones Industrial Average has dropped 11%.

Microsoft also lifted guidance for its full fiscal year, which ends in June, by about $1 billion.

"You've seen soft guidance from Apple ( AAPL), Intel ( INTC) and Motorola ( MOT)," all of which have indicated a slowdown in tech spending, said Allan Krans, analyst with Technology Business Research. "Yet Microsoft is increasing their guidance, saying they haven't seen any slowdown."

Microsoft's explanation for its bullish outlook rests on three factors that executives say will insulate them against a downturn, Krans said. "They're well-diversified, have a number of products that span from consumers to enterprises, and 60% of their business is coming from outside the U.S."

But the higher guidance is just for the first half of calendar 2008. During the last half of the year, "it's a test of how the spending environment is working out, particularly for Microsoft, because they drive a lot of consumer revenue," which tends to be more vulnerable to recessions than business spending, Krans said.

"I think we're going to grow faster than overall global software spending," CFO Chris Liddell said on Thursday's conference call.

While the report didn't move the needle again on Microsoft's one-year target price of $40, several sell-side analysts lifted their revenue and earnings expectations Friday, in line with the company's higher guidance.

"New guidance still looks conservative in terms of PC growth," Microsoft's business revenue product cycles, and margins, JPMorgan analyst Adam Holt wrote. Microsoft is a non-investment banking client of JPMorgan.

The significant increase in unearned revenue "makes us confident that demand for upcoming product launches remains solid," Deutsche Bank analyst Todd Raker wrote in a note Friday. He expects business adoption of the Vista operating system to pick up momentum after the release of its Service Pack 1, which includes all post-release software patches. Microsoft is an investment banking client of the firm.

Liddell emphasized that in server software, corporations are showing a willingness to shift to large, multi-year agreements in advance of software releases. Although this has the effect of appearing to temporarily lower sales in the division, it boosts the company's unearned revenue totals and locks in future revenue.

The transition "bodes well for the business, as it enhances revenue visibility," Holt wrote.

Microsoft's unearned revenue balance grew some $600 million, to $12.2 billion, largely on the strength of these enterprise agreements for server software, Liddell reported. "In terms of enterprise software, the unearned balance is extremely good. We are feeling good about the relative commitment of enterprise customers to multi-year commitments."

Microsoft will make major server software upgrades in February.

"Microsoft shares continue to offer relative outperformance based upon a very rich product cycle" and a trend toward higher-priced editions of Windows software, wrote Mark Murphy, analyst with Broadpoint Capital. The firm makes a market in shares of Microsoft.

"We view the stock as defensive in a tough macro-environment," Goldman Sachs analyst Sarah Friar wrote Friday. "The stock remains at a discount to the software group, with about 20% upside potential to our new 12-month price target of $42," she added. Microsoft is an investment banking client of Goldman Sachs.

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