Software behemoth Microsoft (MSFT) reported strong financial results for the June period, capping off a very good fiscal 2010. Revenues of $16 billion advanced some 22% over the same period last year, owing to the good demand for Windows 7, the general availability of Office 2010, and increased business activity in the Servers and Tools segment. Meanwhile, Microsoft continued to manage expenses quite well, and its operating margin widened sharply. Accordingly, share earnings progressed rapidly, coming in at $0.51, a 50% increase over last year's result. For fiscal 2010, revenues and earnings were nearly $62.5 billion and $2.10 a share, advances of 7% and 29.6%, respectively.

Microsoft ought to continue to benefit from the current PC refresh cycle, which should last a couple of years, and the better business activity in the enterprise arena in fiscal 2011. The latter segment may remain somewhat elongated, though, as customers continue to manage IT spending carefully. Nonetheless, use of the new operating system ought to spread rather quickly, since many corporations did not upgrade Windows XP.

A better environment for online advertising and new products from the Entertainment and Devices segment should also aid revenue growth. Finally, expense management at the Redmond, Washington-based software vendor is set to remain a high priority. As a result, the software giant is very leveraged to top-line growth, and our take is that it should maintain this advantage in fiscal 2011, which began July 1st. In sum, we now look for revenues of nearly $67.8 billion and earnings of $2.40 a share, increases of some 8% and 14%, respectively.

About The Company: Microsoft Corp. is the largest independent maker of software. It develops and sells products for a wide range of computing devices. The company also sells the Xbox video game console. Revenue sources in fiscal 2009 were as follows: Microsoft Business, 32.4% of total; Windows & Windows Live, 25.5%; Server and Tools, 24.3%; Entertainment & Devices, 13.8%; Online Services, 3.7%; Other, 0.3%. Research & development spending as a percent of 2009 sales was 15.4%.