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Windows 7 is the fastest selling OS in history, propelling Microsoft to big gains.  (Source: Paul Sakuma, file / AP Photo )

Bing/Yahoo and Windows Mobile 6.5, though, are suffering in terms of market share. Both share a common problem -- Google.  (Source: MobileTech World)
Windows 7 is the best-selling OS in history, so why aren't investors taking note? Look to the mobile and search businesses...

Following its perennial rival Apple's announcement of a terrific quarter, Microsoft had some good news of its own.  At 5:30 p.m. E.D.T. Thursday evening, Frank Brod, Microsoft's chief accounting officer, and Bill Koefoed, general manager of Investor Relations at Microsoft, announced earning information for Microsoft's quarter ending March 31.

The news was impressive.  Microsoft's fiscal third-quarter revenue totaled $14.50B USD, up 6 percent from the same quarter a year ago.  Factoring in the deferral of $305 million of revenue relating to the Microsoft Office 2010 Technology Guarantee program, the revenue totaled $14.81B USD, a rise of 8 percent.

Operating income, net income and diluted earnings per share were $5.17 billion, $4.01 billion and $0.45 per share, increasing 17 percent, 35 percent, and 36 percent, respectively, from a year ago.

Those gains came largely on the back of Windows 7, the fastest selling operating system in history.  Peter Klein, chief financial officer at Microsoft, comments, "Windows 7 continues to be a growth engine, but we also saw strong growth in other areas like Bing search, Xbox LIVE and our emerging cloud services.  Our record third-quarter revenue along with continued rigor on cost management resulted in exceptional EPS growth."

Windows revenue rose 28 percent for the quarter as Windows 7 reached 10 percent of active systems worldwide.

Kevin Turner, chief operating officer comments, "Business customers are beginning to refresh their desktops and the momentum of Windows 7 continues to be strong.  We are also seeing tremendous interest in our market-leading cloud services for business."

Despite the terrific success, investors aren't showing Microsoft as much love as one might expect.  Microsoft stock actually dropped a bit over 1 percent in after hours trading.  Granted, it rose in the last couple weeks, but overall it's up just over 25.8 percent since early October 2009.  Apple's stock, by contrast, is up 47.8 percent.

One possible reason for investor's unusual lack of bullishness is weaknesses in the non-Windows part of Microsoft's platform.  Xbox and Zune business units are performing decently, but the critical Windows Mobile business has been losing large chunks of market share.  

Microsoft's Windows Phone 7 OS can't come soon enough, but that product faces skepticism from smartphone shoppers due to its lack of support for multi-tasking and copy-and-paste.  Meanwhile, it is likely that Microsoft's existing smartphone OS, Windows Mobile 6.5, will get passed by Google's Android OS sometime this quarter.  That's a troublesome sign as more computing jumps to the mobile realm.

In the internet search business Bing has failed to grow, as well.  According to market research firm Net Applications, Bing has dropped from a peak marketshare of 3.52 percent in August to 3.11 percent in March.  Partner Yahoo, whose search is now powered by Bing, has suffered even more dropping from 7.28 to 5.38 percent over the same time period.  Meanwhile, between July and March, Google jumped from 78.45 percent to 85.75 percent.  Those numbers paint a rather bleak picture for Microsoft's long-troubled search efforts, which it has poured money into.

Ironically, both in the mobile phone and the search markets, Microsoft has the same problem, and that problem has a name -- Google.

So while the company has plenty to celebrate, thanks to the storied Windows 7, there won't be much fanfare in the earnings reports for the languishing smartphone or search engine business units.

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RE: Windows 7 was my idea
By Zingam on 4/23/2010 8:26:08 AM , Rating: -1
"well-deserved praise" for what? Win7 is the same ol' crap they've been selling always. I'm using it for quite some time now and it is in no way any better then what XP and even 95 were. Why do I say that? Just today action center reports me that there are 6 security updates that I have to install because and attacker could harm my system. Oh and I do not count how many time Explorer managed to crash.
At first Win7 appears new, fresh and more stable but after sometime you start noticing the bugs like: Win7 won't refresh the folder view after moving files to another location... etc.

Perhaps the only good thing about Win7 is Aero but it is present in Vista already. There isn't much new about Win7 - perhaps some improvements for SSD and multicore CPUs but nothing revolutionary.
And the biggest problem of all - ultra-super overpriced!

RE: Windows 7 was my idea
By Gio6518 on 4/23/2010 8:55:17 AM , Rating: 5
Just today action center reports me that there are 6 security updates that I have to install because and attacker could harm my system

would you prefer if they went the apple route.....and just deny it, claim it doesnt exist, and leave your system open and vulnerable to attack

RE: Windows 7 was my idea
By XZerg on 4/23/2010 10:42:15 AM , Rating: 2
I like getting the updates right away too but at the same time I find it being notified of a new update every time I start my computer is plain annoying. They ought to make these updates available once a month unless they are super emergency. The drivers and some software updates should be configurable to check every month or three or greater instead of every time system turns on!

Having the system be most up to date every time is probably a need of very few, specifically those who have too much time on their hand and spend it on computers instead of elsewhere.

RE: Windows 7 was my idea
By MrFord on 4/23/2010 11:17:18 AM , Rating: 2
It's called "Patch Tuesday"...

And if you don't see the need to have important updates available ASAP, I imagine "Blaster" ans "Sasser" won't ring a bell.

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