* 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 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
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
"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
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
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
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
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
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
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
"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)