Microsoft earnings paint mixed picture

akeaway: Strong PC sales help company post better-than-expected revenue, though earnings fall short of some investors' hopes. Stay on top of the latest tech news with our free IT News Digest e-newsletter, delivered each weekday. Automatically sign up today!

By Ina Fried
CNET News.com

Amid a strong PC market, Microsoft on Thursday reported quarterly revenue well ahead of analysts' estimates, though earnings fell short of what some investors were hoping for.

The software giant said it earned $2.69 billion, or 25 cents per share, on revenue of $9.29 billion for the three months ended June 30. That compares to earnings of $1.48 billion, or 14 cents per share, on revenue of $8.07 billion for the same quarter a year ago.

Microsoft said the earnings included 5 cents per share of stock-related expenses and a 2-cent-per share tax benefit, while the company's year-ago earnings were dented by the costs of its $750 million settlement with Time Warner.

Excluding the tax benefit and compensation charges, Microsoft had earnings of 28 cents per share. Analysts were expecting the company to post 29 cents in per-share earnings, according to Thomson First Call, while Microsoft itself had forecast per-share earnings of 28 cents in April. Revenue of $9.29 billion was well ahead of the $9 billion that analysts had been expecting, and the $8.9 billion to $9 billion that Microsoft forecast in April.

In after-hours trading following the earnings report, Microsoft shares dipped to $28.09, down 91 cents, or more than 3 percent. Ahead of the report, the company's shares had risen narrowly, closing the regular session at $29, up 14 cents from Wednesday.

"We had a great quarter, with 15 percent revenue growth, as all of our businesses met or exceeded our expectations, and our progress on cost efficacy delivered higher operating margins overall," Microsoft CFO John Connors said in a statement.

In addition to benefiting from strong PC sales and improved MSN advertising sales, Microsoft's revenue was boosted by a relatively weak dollar. The company said the impact of foreign currency rates contributed to about 3 percent growth in its total revenue.