Microsoft Also Reports a Good Quarter

Microsoft just released its Q4FY11 results after the bell. Net income rose to $5.87 billion, or 69 cents a share, from $4.52 billion, or 51 cents a share in the same period last year – and that was ahead of most estimates. The call this afternoon should give us a few clues about some catalysts for the company in the Fall, including Win 8 timing (could perhaps get a beta release in September), Skype integration, Nokia phones, tablets running on a Microsoft OS (company still hasn’t yet announced a tablet-specific OS per se), and a potential dividend increase.

Last week, Microsoft gave its partners an advance preview of Windows Server 8 at its Worldwide Partner Conference. The next version of Windows Server features over 100 new capabilities and enhancements, including a new Hyper-V hypervisor. According to zdnet.com, Windows Server 8 is on the same release track as Windows 8 and could be out as early as the first half of 2012 (with a good cushion for the back-to-school frenzy next year).

The most likely scenario is for a gradual economic recovery and PC refresh cycle, with PC sales growing 2% YoY in CY2011 and 5-6% in CY2012, modestly driving Windows revenue growth. But going forward, the key questions to ask will be whether the Redmond giant can be successful in the highly competitive tablet and handset businesses and if Microsoft can win in the emerging cloud space. While Microsoft has done well with Xbox and is making headway with search, the mobile results have been a bit disappointing, but they are expected to improve once the first Nokia sets with WP7 begin to ship.