Microsoft earnings above estimates

SAN FRANCISCO (Reuters) - Microsoft Corp (MSFT.O) forecast on Thursday next year's earnings to rise between 13 percent and 18 percent, predicting continued strength from its main software businesses as it aims to bolster its Web unit with an acquisition of Yahoo Inc (YHOO.O).

COMMENTARY:

KIM CAUGHEY, SENIOR ANALYST, FORT PITT CAPITAL GROUP

"It looks like they missed a little on the top line. I can't figure out where. Bottom line looks strong. It's nice that they're raising guidance for the rest of the year. Microsoft is an extremely conservative company with respect to guidance. That's always positive that they're raising guidance. It looks like the client (desktop software) was softer than the year ago period."

TOM TELFORD, VICE PRESIDENT AND PORTFOLIO MANAGER, AMERICAN CENTURY INVESTMENTS, KANSAS CITY. OWNS MICROSOFT IN AMERICAN CENTURY TECHNOLOGY FUND

"It looks like the operating income came in a little bit light versus the expectation. They had a lower tax rate and a lower share count. Revenues came in a little bit light. The main culprit there was the client business. The division that did really well was the entertainment business. The guidance for the quarter and next year was pretty positive."

ANDREW LOECHL, DIRECTOR, EAGLE HARBOR ASSET MANAGEMENT

"They were beating estimates by 3 cent which was not as high as the whisper number. Revenue was in line with estimates."

"There's nothing alarming but I'd like to see more detail on how Windows Vista, Office and their server business shaped up. I didn't see the detail on (the FY '09 forecast). It looked positive."

"I think it's a difficult decision versus whether they are going to merge with Yahoo or not but it's up to Yahoo to decide if they are going to come to the table. I don't anticipate Microsoft offering more than what they are offering. I would anticipate they would try a hostile bid if Yahoo doesn't (agree)."

ANDY MIEDLER, ANALYST, EDWARD JONES

"The earning and outlook look pretty good. We were happy to see the positive outlook for 2009. The important point is technology and Microsoft are economically sensitive. However, the stability of Microsoft's business and diversification have led Microsoft to be more defensive than others. Diversification from an international and product basis makes them more stable and defensive than others."

"I don't think these results can draw any conclusions about Yahoo. We do rate shares at 'hold,' due to the uncertainty regarding their attempt to acquire Yahoo. We downgraded on the original news. Strategically, we think the Microsoft Yahoo deal makes a good deal of sense. But from a financial perspective, we're cautious. We already think they're paying a high price. Integration risks will be significant."

JANE SNOREK, SENIOR ANALYST, FIRST AMERICAN FUNDS

"I'm not happy that the stock is trading down. They beat, it's just very odd. Revenue was in line and EPS beat by 3 cents. It looks like the EPS surprise was XBox. There was no revenue upside which doesn't make any sense. I think people were looking for some upside on the revenue side."

"In the next quarter they raised their revenue above the Street range but lowered their EPS to the bottom range of where people were. That could be a problem. They lowered next quarter by a penny and a half...which is bad."

"They gave preliminary guidance for FY '09. Revenue is way above anybody ('s forecast). For EPS they are (above consensus). I like the guidance for 09."

(Reporting by Gina Keating in Los Angeles; and Kenneth Li and Calvin Mankowski in New York; Editing by Adam Tanner)