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Microsoft On Target In Fourth Quarter But Windows Sales Still Sliding

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Microsoft’s fourth-quarter earnings came in about where Wall Street had expected, but the decline of its Windows business continued during a holiday quarter when it seems pretty clear other gadgets dominated shopping lists.

Revenue for the quarter was $20.89 billion, a little off of what analysts were expecting but when the numbers are that big a miss of $40 million isn’t the end of the world. Earnings per share were $0.78, two cents better than expectations, and so overall there was much rejoicing in the after-hours market, which really shouldn’t be held during Happy Hour on the East Coast.

Still, Microsoft (NSDQ: MSFT) has a well-documented long-term problem. Windows continues to generate big profits but it’s in decline, buffeted by the mobile revolution that Microsoft mainly participates in through licensing agreements. This is a big year for Windows Phone and Windows 8, two projects that appear to show Microsoft has learned some lessons over the last five years but are still in “wait-and-see” mode.

In other areas, the company is doing quite well. Xbox sales continue to grow, leading Microsoft’s Entertainment and Devices group to a 15 percent revenue boost, the best performance of any division. And the amount of money Microsoft continued to pour down the Internet drain decreased in its fourth quarter, to “just” $458 million, an improvement from last year’s loss of $559 million coupled with revenue growth of 10 percent.