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Updated from 4:44 p.m. ET


(MSFT) - Get Microsoft Corporation (MSFT) Report

cowed critics Wednesday by beating Wall Street estimates by a nickel in its fiscal first quarter, and then it offered an optimistic outlook.

The company earned $2.58 billion, or 46 cents a share, excluding an accounting change. That compares with $2.19 billion, or 40 cents a share, a year earlier. Analysts had expected the company would earn 41 cents a share in the quarter, which ended Sept. 30, according to

First Call/Thomson Financial


The software company's revenue increased 7.7% to $5.8 billion, from $5.38 billion in the year-earlier quarter.

"Results were solid across all businesses, led by accelerating deployments of

Windows 2000 Professional

in the business sector and

Windows Me

in the consumer arena," John Connors, chief financial officer, said in a statement. "We also continued to make great progress with our server products, proving our ability to deliver mission-critical solutions to customers such as



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. While we remain guarded about worldwide economic conditions, we are extremely enthusiastic about our Windows 2000 generation of server products."

"It was a very good quarter; give them credit where it is due," said Michael Stanek, an analyst at

Lehman Brothers

, which has done no underwriting for Microsoft. "The stock is trading just above the market multiple now; I don't know what more people want." (Stanek rates the stock a buy.)

While the September quarter's figures were impressive, perhaps more importantly Microsoft offered some encouraging words for investors about the future. In the company's conference call, Connors said Microsoft expects fiscal second-quarter revenue and earnings to rise on a percentage basis in the low teens from the year-earlier period and in the high teens from the fiscal first quarter. Connors also said that fiscal year earnings are likely to beat the current consensus analyst estimate of $1.88 per share thanks to Microsoft's better-than-anticipated showing this quarter.

In the most-recent quarter, the company's income was reduced by $375 million because it adopted a new accounting standard regarding derivative instruments and hedging activities. Including the change, Microsoft earned $2.21 billion, or 40 cents a share.