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SEATTLE (Reuters) – Sales of Microsoft Corp's Windows code lapse brief of outsized expectations, rekindling fears that the distribute of ambulatory gadgets module erode its main PC-focused business.

Microsoft astonied Wall Street with a better-than-expected profit, helped by resurgent corporate outlay after the belt-tightening of time years. But its shares stayed insipid as investors spoken anxiety most the imperfectness of coverall computer income amid a faltering U.S. recovery.

The world's maximal code maker, whose Windows operating grouping runs on 90 proportionality of the world's computers, is heavily interdependent on PC sales, which grew exclusive 3 proportionality in the quarter. Now it is play to feel the heat from investors eyeing the extraordinary take-up of Apple Inc's iPad.

"Outstanding drawing when you verify a first look at it, but when you withdraw into them, Windows missed expectations by $300 million," said Brendan Barnicle, shrink at Pacific Crest Securities.

Sales of smartphones and tablets are cod to acquire such more apace than PCs over the incoming few years, move a danger to Microsoft's key market.

With the migration to ambulatory devices from desktop computers cod to accelerate, Apple overtook Microsoft to embellish the maximal U.S. profession consort by mart continuance terminal May.

But whatever analysts argued that fears of tablets and another hot-selling gadgets exchange PCs were portentous -- at least for now.

"We've gotten over 300 meg Windows 7 licenses sold. I mean, PCs are not disappearing. Put that into appearance with 7 meg tablets oversubscribed terminal lodge from Apple," said BGC Financial's Colin Gillis.

"Clearly there are disruptions in the landscape, but whatever of the perverse viewpoints are overblown."

Microsoft hit is downbound most 3 proportionality over the time 12 months, compared with a 24 proportionality acquire for the tech-heavy Nasdaq. Apple shares are up 65 proportionality over the aforementioned period.

EARLY RELEASE

The results astonied the mart after being unconcealed online by accumulation see firm Selerity, which posted acquire and income drawing on Twitter at 2:50 p.m. EST.

Trading in Microsoft's shares alcoholic just under an distance later, after blogs and programme agencies started news the earnings from the scheme tender unconcealed by Selerity, sending the shares up as such as 2 proportionality to $29.46. They ebbed backwards to $28.87 at the close, a 0.3 proportionality acquire for the day. They drifted slightly modify in after-hours trading.

"A preproduction plan of our earnings release was unconcealed by one or more media sources who then publicised our results to the scheme before mart close," said a Microsoft spokesman, who apologized for whatever fault and said the consort was reviewing procedures to make sure it does not hap again.

WINDOWS FALLS SHORT

Though Microsoft faces longer-term challenges in the PC arena, its another core product, its flat of Office applications, generates brawny cash flow.

Sales at its Office organisation chromatic 24 proportionality to $6 billion, indicating that U.S. businesses are play to pay more on profession after the recession.

But consumers are proving inferior resilient. U.S. initial jobless claims surged in the latest week to their highest since October, indicating that whatever feat in consumer outlay module become exclusive in fits and starts.

Sales for its Windows organisation lapse 30 proportionality to $5.054 billion, a little brief of analysts' expectations of most $5.3 billion, cod to the unenthusiastic ontogeny in PC sales. The year-ago amount was expanded by $1.71 1000000000 in delayed income and pre-sales from the launch of Windows 7.

The perennially money-losing online services division, bag of the Bing see engine, posted a 19 proportionality process in sales, but saw its loss widen 17 proportionality to $543 million. The unit, which is making exclusive slight headway against Google Inc, has forfeited more than $6 1000000000 in the terminal fivesome years.

Unearned income -- a measure of the strength of the playing in Microsoft's scuttlebutt -- lapse 9.5 proportionality to $13.4 billion, a cause of anxiety to whatever investors.

KINECT BEST HOPE?

Microsoft reportable coverall fiscal second-quarter acquire of $6.63 billion, or 77 cents per share, compared with $6.66 billion, or 74 cents per share, a assemblage earlier. The per deal amount was higher cod to a reduction in shares unpaid from terminal year.

Wall Street was expecting 68 cents per deal profit, according to composer Reuters I/B/E/S.

Sales chromatic 5 proportionality to $19.95 billion, helped by brawny income of its Kinect hands-free recreation grouping and Xbox consoles, handily fighting analysts' cipher judge of $19.15 billion.

"Kinect represents the most lawful possibleness we hit seen for the Xbox to intend whatever profit. I do think there is a meaningful accelerator there," said Motley Fool grownup shrink Tim Beyers. "The Windows sound looks good. I do think that Windows Phone 7 is proving to be an engrossing deciding to the Blackberry.

"I guess the nut of it is, Microsoft is play to do something meliorate and they are not tripping on themselves, and that counts for something."

Microsoft today has $41.2 1000000000 in cash and short-term investments on its equilibrise sheet. Chief Financial Officer saint psychoanalyst said he was bright with the cash it is distributing to shareholders, retentive discover little hope of a dividend hike, which whatever investors would like to see.

(Editing by Edwin Chan and by Phil Berlowitz)

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