Why such a phenomenal report? Pick a sector, and Microsoft beat. Pick a metric, and Microsoft excelled. The company's downtrodden Entertainment and Device Division, home of the Xbox, blew away expectations. The consensus was around $1.4 billion; Microsoft beats by a half-billion dollars. I mean, we knew Xbox was doing well, thanks to big sales from Halo 3, but this big? Wow!
Check out Client Software and Business Services. Both hit $4.1 billion when the Street was at $3.83 billion and $3.9 billion respectively. The Web Services Group was supposed to see a nice increase, but this much? Web Services, the new home of aQuantive, posting $671 million instead of the $618 million that was expected. Deferred revenue? $11.6 billion. Analysts expected $11.5 billion.
"It's definitely a big surprise," Piper's Michael Olson just told me. "The key going forward: We had a big foundation in '07 with Office and Vista. This year is the deployment year, and they'll provide building blocks for other products. In addition to all that, they're starting to get some traction in the online business, and even though it might be costing them an arm and a leg to do it, at least they're starting to make an imprint. Things are coming together for them."
Olson maintains his "buy" rating on the stock, which is noteworthy. Microsoft shares on this news quickly scampered 12% or better, adding a staggering $35 billion in market cap in just a blink of an eye. And to Olson, and likely others on the Street, those shares might be a good deal even at these levels.
Get ready for yet another Wall Street upgrade parade.
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