Windows 7, corporate upgrade cycle propel Microsoft's fourth quarter

Updated: Microsoft's fiscal fourth quarter results highlighted gains from a corporate IT upgrade cycle as earnings and revenue handily topped Wall Street expectations.

The company reported net income of $4.52 billion, or 51 cents a share, on revenue of $16.04 billion. Wall Street was expecting earnings of 46 cents a share on revenue of $15.27 billion. Some market watchers were also comparing Microsoft's revenue to Apple's as a symbolic comparison, but the software giant topped Apple's $15.7 billion in quarterly revenue.

Not-so-surprisingly, Windows 7 carried team Microsoft with a big assist from Office 2010. Microsoft's servers and tools business also performed well due to the corporate upgrade cycle.

In a statement, Microsoft's Kevin Turner, chief operating officer, talked up Windows Azure and the company's online productivity tools. For the fiscal year ending June 30, Microsoft reported net income of $18.76 billion on revenue of $62.48 billion.

Microsoft gave operating expense guidance for fiscal 2011, but little else. Microsoft is projecting expenses of $26.9 billion to $27.3 billion for fiscal 2011.

Key points from Microsoft's conference call:

• Microsoft CFO Peter Klein said Microsoft has sold 175 million Windows 7 licenses.
• "We are encouraged by the resurgence in business PC shipments, and expect the business PC refresh cycle to continue through fiscal year 2011. The recent refresh of our Enterprise Products has positioned us well to meet customers' needs as they return to investing in information technology," said Klein.
• Microsoft has no answer for tablets. Klein was asked about tablets and said:

We think tablets are very interesting and remind us that there are always new scenarios and new opportunities. And we are constantly working with our partners and our OEM partners. In fact, I think one of the things that has driven the PC market and Windows growth this year has been the work we have done with our OEM partners on multiple scenarios and form factors and price points to hit all those.

If you look at the segment results, there are a few key takeaways:

• Server, Windows 7 and Office are strong;
• The online business unit continues to lose a lot of money;
• Entertainment and devices lost money.

And the key slides: