For Microsoft, Pain May Be Brief

Wall Street expects a revenue slip, but this may only be temporary.
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Software giant

Microsoft

(MSFT) - Get Report

will shine a light on tech spending when the company announces its eagerly anticipated third-quarter results Thursday after market close.

Despite

solid

results

from

Apple

(AAPL) - Get Report

and

Google

(GOOG) - Get Report

, most of the tech sector is still

reeling

from the spending crunch.

Microsoft, which is one of the most recognizable brands on the planet, is hardly immune to the recession. It is expected to post

lower

sales than the same period last year.

Based on analysts' revenue

estimate

of $14.09 billion, Microsoft is in danger of reporting its first year-over-year sales decline in its 23-year history, underlining the challenges facing the tech sector. If the company's sales come in as expected, they will represent a decline of 2.5% on the prior year's quarter and a 15% sequential drop.

Analysts surveyed by Thomson Financial are looking for earnings of 39 cents a share, compared to 47 cents a share in the same period last year.

Confronted with a slumping PC market, investors will be closely monitoring the impact on sales of Microsoft's Windows operating system. At least one analyst, however, thinks the third quarter will mark the low point of the software giant's fiscal year.

"It looks like March could be the recessionary trough for client revenue," wrote Katherine Egbert, an analyst at Jefferies & Company, in a note released Wednesday. "PC units and Windows mix could be better than feared."

The analyst pointed to chip giant

Intel

(INTC) - Get Report

's recent comments about bottoming PC demand, and better-than-expected shipment figures from technology research firms.

"Gartner, IDC and Intel all noted stronger demand in the largest PC markets, the US and China, and still-weak demand in Europe and other emerging markets," wrote Egbert.

Another analyst says that Microsoft is looking to get its new

Windows 7

operating system to PC manufacturers earlier than expected, offering a long-term boost to revenue.

"Release to manufacturers will likely happen in the first week of July, two months in advance of what

Wall Street is expecting," wrote Sandeep Aggarwal, senior internet research analyst at Collins Stewart. "We believe that Windows 7 can be a $3 billion in incremental revenue opportunity for Microsoft."

Shares of Microsoft slipped 19 cents, or 1.01%, to $18.59 in Thursday trading, mirroring the broader decline in tech stocks which saw the Nasdaq fall 0.28%.