* Tech giant reports quarterly earnings on Thursday
* Wall Street sees 9 pct rise in Q4 earnings
* Analysts see record fiscal year earnings
* PC sales growth faltering, stock stuck in mid-$20s
* Analysts see fiscal Q4 EPS $0.58 vs year ago $0.51
* See Q4 sales $17.2 bln vs year-ago $16 bln
By Bill Rigby
SEATTLE, July 18 (Reuters) - Microsoft Corp (MSFT.O) is set to post a 9 percent jump in fiscal fourth-quarter profit on Thursday, putting the cap on its best financial year ever, but investors are fidgety over flagging computer sales and a gnawing feeling that the tech pioneer will never recapture old growth rates.
The shares of the world's largest software company have risen 10 percent over the past month -- outpacing the tech-heavy Nasdaq -- but still are perched in the mid-$20 range, a level they have circled since 1998, adjusted for splits.
"There's just not enough growth there to make people interested," said Michael Yoshikami, Chief Executive of fund manager YCMNET Advisors. "It's the Johnson & Johnson (JNJ.N) of technology. A large, cash flow-oriented company, but explosive growth has probably passed it by the wayside."
Microsoft's fourth-quarter sales are expected to push annual revenue close to $70 billion for the first time on Thursday, slightly more than Apple Inc's (AAPL.O) last fiscal year. It is also on track for a best-ever $22 billion in net profit for the 2011 fiscal year, according to Thomson Reuters I/B/E/S. Microsoft had net income of $18.76 billion last year year.
But records are not enough for investors, who are more focused on a post-PC future driven by Internet-focused services and mobile gadgets from Apple, Google Inc (GOOG.O) and Facebook.
Analysts expect Apple's revenue to be twice Microsoft's by fiscal 2014, from relative parity now. (For an interactive graphic comparing major tech firms, click on r.reuters.com/nuw62s)
Microsoft's sales grew 12-fold between 1991 and 2000, whereas they grew by only two and a half times between 2001 and 2010.
"We have concerns about Microsoft," said Bruce Ventimiglia, Chief Executive Officer at fund manager Saratoga Capital Management. "As we look at Google and others attacking their business lines, our view over the long run is that it's going to erode margins. Microsoft is not moving as forcefully in the tech space as we'd like to see."
PC SALES WOBBLY
Microsoft's most immediate problem is faltering growth in sales of PCs, which generally come pre-loaded with the Windows operating system and are the surest guide to the company's financial health.
PC sales grew only 2.3 percent in the second quarter of 2011, according to tech research firm Gartner, well below its earlier projection for 6.7 percent growth, as economic uncertainty hangs over consumers and Apple's iPad and other tablets take off.
Microsoft said last week it has now sold more than 400 million Windows licenses since launch in October 2009, up from 350 million three months ago. That suggests 50 million Windows sales in the quarter, about the number it sold the quarter before that.
Windows 7, while still popular with consumers, has already become old news for investors eyeing 'Windows 8' -- the provisional name for the next tablet-friendly operating system expected late next year.
Microsoft has been showing off early prototypes of the new system -- which borrow the look and feel from its mobile platform -- but is not expected to reveal any new details until its annual developer conference in September.
But some are tired of waiting. In May, outspoken hedge fund manager and long-time Microsoft shareholder David Einhorn called for the removal of Chief Executive Steve Ballmer and a sale of its money-losing online services unit to revive the stock. [ID:nN25183623]
In the last week, a June-dated letter from an anonymous investor to Microsoft's lead independent director has been widely circulated, calling for the company to issue $40 billion of debt to fund a massive share buyback and to direct all its domestic cash flow toward paying dividends.
Microsoft, which has not always had easy relations with investors, has shown no indication it is considering any of these courses of action.
Ballmer and his executives say they are making the right moves -- cutting a deal to put Microsoft software on Nokia (NOK1V.HE) phones, agreeing to buy online video-chat company Skype, making the most of its small investment in Facebook, while hacking away at Google with its Bing search engine.
The company is hoping its efforts will ultimately create a coherent, Internet-compatible whole, spanning operating systems to business software to phones and tablets.
Investors are not buying it so far. The stock now trades at 9.7 times analysts' estimates of earnings for the next 12 months, according to StarMine data, which places greater weight on more accurate analysts. That is around the lowest it has ever been, and lags Apple at 12.6 times and Google at 15.3 times.
"Microsoft certainly has a lot of money and some smart people, but we need to see their investment prowess pay off before we can get excited about it," said Ventimiglia at Saratoga Capital Management.
Analysts expect fiscal fourth quarter earnings per share for Microsoft of 58 cents, up from 51 cents a share in the year ago period. They expect fourth quarter sales of $17.2 bln, up from $16 bln a year ago. (Reporting by Bill Rigby; editing by Carol Bishopric)