Instant view: Microsoft's Office shines, offsets tepid Windows

(Reuters) - Microsoft Corp's fiscal first-quarter profit rose 6 percent, meeting Wall Street's modest expectations, helped by strong sales of its popular Office applications package but hindered by tepid gains from its flagship Windows operating system.

Commentary:

RICHARD WILLIAMS, ANALYST, CROSS RESEARCH

"Client was weaker than I expected. We were pretty aggressive looking for enterprise refresh.

"Server and tools was weaker than I anticipated that could be that Windows 8 coming out that could hurt sales in the near term. That is essentially what happened to Apple.

"Xbox slowed down, it's natural it would slow down for next quarter. It's the same function that happened to Server and Tools -- they knew that cool things are coming and rather than buy now they would wait."

SID PARAKH, ANALYST, MCADAMS WRIGHT RAGEN

"It was largely in line as a quarter. Where it deviated from our estimates was on the client side, which we were somewhat expecting.

"The full revenue number is good to see. It was slightly higher than consensus expectations. That implies that some of the enterprise interest that we saw over the last few quarters, especially last quarter, is continuing in their product portfolio."

BRENDAN BARNICLE, ANALYST, PACIFIC CREST SECURITIES

"They're sort of in-line. We still had Windows miss again although not by nearly as much as it has the last couple quarters.

"It is surprising server and tools missed by a little more than I would have expected.

Shares fell because "they were just in line on EPS, which typically Microsoft beats. They had a slight miss in the Windows business, a little more significant miss in the server and tools business, and a miss in the online business.

"They are also guiding operating expenses up because of Skype, which probably shouldn't be a surprise but we're actually seeing that impact now.

"It's sort of what we were expecting. Q1 is seasonally not a big quarter for Microsoft and this was no exception."

MICHAEL YOSHIKAMI, CEO, YCMNET

"The numbers are not terribly unexpected. What is most critical is looking at the revenue transition from PC sales to alternatives.

"With the computer slowdown, the more the gaming becomes a bigger part of what they are doing, the more important it becomes to the business. I know they also swallowed Skype which impacted their financial results.

"I wouldn't call this quarter a disaster but it does underscore a company in transition. They realize they are in transition and they are trying their best to move into gaming and tablets and move into the cloud.

"Their old earnings line is going to get compressed. The Windows 8 announcement is interesting but in a tough economy I'd be surprised if any companies step up to buy Windows 8 and it's in the upgrade where Microsoft makes money."

TRIP CHOWDHRY, ANALYST, GLOBAL EQUITIES RESEARCH

"In-line quarter and I think good execution in the macro environment, but the question still lingers on.

"A big question mark for Microsoft is what is the next multi-billion problem that Microsoft is going to solve? Until Microsoft can identify the next multibillion problem the customer is facing," the stock won't go up.

"Coming up with the next version of an existing product is not a strategy. Somehow Microsoft has failed to identify new markets both from a product perspective and business perspective.

"I don't think its stock can go up with the current product line they have. I don't think Windows 8 will propel the stock above $30."

COLIN GILLIS, ANALYST, BGC FINANCIAL

"To be able to beat on the revenue line is impressive, because we all know it's a weak consumer PC environment out there.

"The current product refresh cycle has been continuing now for several quarters. They're starting to talk more about Windows 8. For them to be able to put up $17 billion in revenue, a 7 percent increase, is impressive.

Shares fell "primarily because there is no upside to earnings. From an earnings angle it was in line, from a revenue angle a modest beat.

"In a difficult PC growth environment, the company is doing great."

(Reporting by Jennifer Saba and Liana Baker in New York and Lisa Richwine in Los Angeles)