Microsoft (MSFT): the Lance Armstrong of tech stocks?

Like the Tour de France champ, Microsoft has strength and durability. But it isn't winning the races that count.

Sandy Huffaker/AP/File
Microsoft employees give out products during a raffle at the Microsoft Store during their grand opening on June 24 in San Diego. This was the fourth grand opening nationwide for the computer retailer (MSFT), which announced record revenues Thursday.

Microsoft (MSFT) is looking a lot like the Lance Armstrong of tech stocks.

Its strong, enduring, even fleet, at times.

But just as the seven-time winner of the Tour de France isn't winning bicycle races these days, neither is Microsoft winning the cutting-edge competitons that count.

Instead, the Redmond, Wash., software giant is doing what traditional companies do, boosting revenue and cutting costs. On that front, it's executing quite well.

Its quarterly earnings report released Thursday after the market's close beat analysts' expectations, both for total sales (a record $16 billion vs. an estimated $15.3 billion) and earnings per share (51 cents vs. a predicted 46 cents). the company successfully launched Office 2010 and has sold 175 million licenses for its Windows 7 operating system. (Apple will have to sell a lot of iPhones 4s to match that.)

“The revenue growth, combined with our ongoing cost discipline, helped us achieve another quarter of margin expansion,” said Peter Klein, the company's chief financial officer, in a release.

But on the frontiers of consumer technology, it's success has been more limited. Its Bing search engine continues to gain market share, but it remains far behind its competitors. Microsoft's online services group lost $696 million for the quarter.

Smartphones? They're all the rage among consumers, but on June 30 Microsoft suddenly abandoned its Kin smartphone that it had launched just weeks earlier. It's Windows smartphone project is still rolling forward, but sales by competitors like Apple and Google are booming. Can Microsoft realistically catch up?

When Apple earlier this year overtook Microsoft in terms of market capitalization, it didn't come as much of a surprise. (With its strong quarter, Microsoft still beat Apple in terms of sales – barely.)

Microsoft retains big potential. Its upcoming hands-free motion-control system, known as Kinect, for its Xbox videogame console could rival sales of Apple's iPad, one analyst forecast.

Similarly, the company is moving into cloud computing, where businesses' data and/or applications no longer reside on their own servers. These may one day transform the company into being a cutting-edge contender once again, if cloud computing takes off.

For the moment, though, they're more promise than profit. Before it can turn these projects into big moneymakers, analysts say, Microsoft has several big hills to climb.


Blog: Microsoft: We’ll pay you to search

Blog: Microsoft trots out a new Zune. But can anything unseat the iPod?

Blog: Google Nexus One goes the way of the Kin

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