Microsoft shares hit 52-week high on earnings

SAN FRANCISCO (MarketWatch) � Microsoft Corp. shares rose to their highest level in almost two years Friday as investors reacted positively to the software giant�s quarterly results, yet analysts still cautioned about upcoming business due to expected weakness in the PC market.

Microsoft MSFT �climbed $1.59 a share, or 5.7%, to $29.71 and reaching their highest point since May 2010. The stock�s rise came after Microsoft, on Thursday, reported a fiscal second-quarter profit of $6.62 billion, or 78 cents a share, on $20.89 billion in revenue for the quarter ended Dec. 31. During the year-ago period, Microsoft earned $6.63 billion or 77 cents a share on sales of $19.95 billion.

Click to Play Tech giants' revenue slows

Three of the biggest names in technology grew more slowly in the latest quarter, but showed little sign of a broad spending slump, Spencer Ante reports. (Photo: AP)

Analysts surveyed by FactSet Research had forecast Microsoft to earn 76 cents a share on $20.9 billion in revenue.

Strength in Microsoft�s business division and sales of Xbox videogame consoles and other entertainment products helped the company balance out against a 6% decline in revenue from sales of Windows operating systems. The company estimated that sales of PC units fell between 2% and 4% in the last quarter of 2011.

Last fall�s flooding in Thailand caused several makers of computer hard-disk drives to suspend their operations in the country for weeks at a time, resulting in disruptions in supply chains that are expected to stretch into this year and results in decline in PC sales.

Kevin Hunt, an analyst who covers Microsoft for Auriga, said the company believes that PC shipments would be hit at least through the March quarter, and �the impact could be longer,� with netbooks for consumers expected to be the weakest area within the PC sector at the present time.

/quotes/zigman/20493/quotes/nls/msft MSFT 28.51, -0.05, -0.16%

Credit Suisse analyst Philip Winslow said that with regards to Microsoft, his �near-term concerns are the potential impact of lackluster consumer-PC demand� and continued hard-drive disruptions on the company�s revenue from Windows.

However, he added that he remains encouraged by Microsoft�s upcoming Windows 8 operating system, which is set for an early beta release in February, and expected to be on the market in the second half of the year.

Windows 8 �will have a more meaningful position in tablets than the market appreciates,� according to Winslow, �which we believe will serve as a catalyst for the stock.�