* Microsoft reports fiscal first-quarter results Thursday
* Wall Street sees Q1 EPS $0.68 vs year-ago $0.62
* Sales seen up 6 percent, helped by Office
* Attention on Windows sales as PC market drags
By Bill Rigby
SEATTLE, Oct 20 (Reuters) - Microsoft Corp looks set to report flat or lower demand for its flagship Windows product on Thursday, a victim of limp personal computer sales, casting a shadow over otherwise strong earnings in a troubled global economy.
The world’s largest software maker generally meets or beats Wall Street’s profit forecasts -- as it has for the last nine quarters -- but investors tend to focus on Windows sales, which have dropped for the last three quarters when compared to year-ago figures.
In each of those three quarters, Microsoft shares have drifted lower in the days or weeks following earnings.
“It’s a seasonally soft quarter for them,” said Kim Forrest, senior analyst at Fort Pitt Capital Group, which holds Microsoft shares. “I want to hear comments on what will happen to the PC market. I expect little or no growth from the consumer. I just want to know that companies are still spending.”
Global PC sales rose only 3.2 percent last quarter, according to research firm Gartner, propped up by emerging markets such as China. In the United States and Europe, consumers are reluctant to buy new PCs, or are lining up to buy Apple Inc’s iPad instead.
Microsoft is shielded from the consumer slowdown partly because its core corporate customers are still spending money on new technology.
Strong results and a buoyant outlook from chipmaker Intel Corp on Tuesday also suggest that PC demand is not as weak as some fear.
The fact that PC sales are slow -- especially in the United States and Europe -- is no secret. The question is how much investors have already factored that into Microsoft’s performance.
The company’s shares are up 7 percent from 12 months ago, slightly ahead of the Nasdaq composite index’s gain, closing at $27.13 on Wednesday. But the stock is still stuck in the $20-$30 range, as it has been for most of the past 10 years.
Wall Street expects Microsoft to report a profit of 68 cents per share for its first quarter of fiscal 2012, up from 62 cents a year ago. Analysts are looking for sales to rise 6 percent to $17.2 billion.
The sales increase is likely to come from the unit which sells Microsoft’s Office suite of applications -- now the company’s biggest-selling product -- and the entertainment and devices unit, which makes the popular Xbox game console and Kinect hands-free game system.
Its server and tools unit -- which sells server software that powers data centers and “cloud computing” infrastructure -- is also growing strongly.
The black spot on Microsoft’s report card is always its online services unit -- which includes the MSN portal and Bing search engine -- which has lost more than $8 billion in five years and shows no sign of stopping the bleeding, as Microsoft invests heavily to catch up with market leader Google Inc .
Aside from hints on the state of the PC market, investors will be listening for Microsoft’s plans to integrate Skype into its products, after its $8.5 billion deal to buy the online chat service closed last week.
Any word on other possible deals would be eagerly received. Last month Reuters reported Microsoft might be looking at a second attempt to buy ailing Internet giant Yahoo Inc .
Microsoft is also likely to detail plans for its latest assault on the smartphone market soon. The first phones from its partnership with Nokia are expected on the market in the next two months.
On top of that, investors will welcome any news on the development of Windows 8 -- the code name for its new operating system -- which is set to hit the market next year and will represent Microsoft’s charge into the tablet market.