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Microsoft Bucks the Tech Trend

Pessimists expecting signs of a tech slowdown didn't find what they were looking for in Microsoft's strong second-quarter earnings
Microsoft chief executive, Steve Ballmer
Microsoft chief executive, Steve Ballmer Getty Images

Investors bruised by this year's tech-stock rout found a balm in Microsoft's fiscal second-quarter results released on Jan. 24. It wasn't the blockbuster results that Microsoft (MSFT) reported in October, but sales surpassed analyst expectations nonetheless, and the company raised financial forecasts for the rest of the fiscal year. That was good enough for shareholders who have been scouring results from every bellwether for signs that the economic slowdown is damping tech demand.

They found scant evidence in Microsoft's numbers. In the quarter ended Dec. 31, profit jumped 79%, to $4.71 billion, or 50¢ a share, as sales climbed 30%, to $16.37 billion. Analysts had expected earnings to increase 66%, to $4.35 billion, or 46¢ a share, on a 27% increase in revenue. Results were bolstered by a combination of strong PC sales, upgrades to Microsoft's most popular products, and the relative safety of its international business. Microsoft also benefited from the deferral of $1.6 billion in revenue from its December, 2006, quarter, when it gave customers coupons for new versions of its Windows operating system and Office productivity package, aimed at business users. Not counting that gain, revenue still rose 15%.