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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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Some real numbers to know
By hiscross on 4/23/2010 9:29:43 AM , Rating: 2

"Over the last decade, Apple's stock has risen from $7 to $266 per share. That's over 3500% growth. During that same time frame, Microsoft's stock value has grown a paltry 65%

Apple doubled its net income during one of the worst recessions in our history (2007-2009). Microsoft's income rose a miniscule 5% during that time. "

It is good that Microsoft is healthy, because the US economy can use all the help it can get. The biggest issue with Microsoft is they still believe the desktop is king. Google and Apple have raised the bar and moved to mobile computing. So far, Microsoft doesn't have an answer to mobile computing (please don't tell me WinMobile 7 is their answer because it is clearly a catch up from 2007). I will say Win7 desktop is nice.

RE: Some real numbers to know
By Anoxanmore on 4/23/2010 9:50:03 AM , Rating: 2
Well when you are at the bottom, there are only two options, go up, or go bankrupt. (cough)Apple(cough)

RE: Some real numbers to know
By Mitch101 on 4/23/2010 11:12:20 AM , Rating: 2
It would be a real shame if Apple lost a portion of that iPhone Market to Droid and Microsoft considering it appears the iPhone is Apples only real cash cow.

Cut off the iPhone/iPod and its back to 2007 for Apple. The sharks are circling the waters.

Droid Shark is starting to take a bit of that Apple.

RE: Some real numbers to know
By hiscross on 4/23/2010 11:38:30 AM , Rating: 2
It's all about performance kiddies. If you take Win OS and Office away from Microsoft they would collapse since those two products are their cash cow. Every good and strong company has a cash cow or two and that is why they are strong. Competition is also needed, so the Andriod thing is good for Apple since it pushes them to make a better product. It is clear you people don't own and operate a business and your examples reflect your lack of understanding of business. Yes, I won and operate a business and I am a capitalist just like Steve.

RE: Some real numbers to know
By Mitch101 on 4/23/2010 12:08:28 PM , Rating: 2
If you really had a business of 10 people or more you might have mentioned Microsoft Small Business Server which is an incredibly affordable and useful package for small businesses.

I also suppose you dont think Microsoft doesn't make any money from Sharepoint, Exchange, Windows Servers, SQL, ISA, Visual Studio, product support, or Forefront products to name just a few. Ever heard of Microsoft corporate license plans they can go into the millions of dollars for a company.

RE: Some real numbers to know
By hiscross on 4/23/2010 2:21:21 PM , Rating: 1
You really need to read my last post. If you did then you would have pointed out I wrote won instead of own. Yes, I very familiar with Microsoft products since I used most of what you wrote at various places I've worked. Some are better than others, but to own any of them, no thanks. My MacOSX Server works just fine.

RE: Some real numbers to know
By Anoxanmore on 4/23/2010 3:34:38 PM , Rating: 2
Well since you are so much like Steve, so much for your hot girl theory. :(

RE: Some real numbers to know
By Mitch101 on 4/24/2010 9:25:34 AM , Rating: 2
You really need to read my last post

I did and it really doesnt matter how you aquired said buisness. Microsoft has many cash cows not just on a consume level but on a buisness level as well. Apple only real cash cow is its phone and with its limited market of AT&T and other companies coming with products as good as the iPhone but with alternative carriers that Apple cash cow is about to get a trim.

RE: Some real numbers to know
By jonmcc33 on 4/23/2010 12:24:04 PM , Rating: 2
All due to iTunes, iPhone and iPod sales. If you want to compare just OS sales then Apple would be insignificant, because you need to buy their hardware with the OS.

Then lets count office productivity sales. How much does Apple have with that? Ooooo...burn!

Then we can count video game console sales. Is there anything from Apple? Anything? Hello?

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007

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