Microsoft Earnings Preview: Solid Growth on Tech Refresh; Apple Looms

Microsoft (MSFT) has reached an amazing milestone -- and it's not a good one.

For the first time, the legendary software company has been surpassed by its traditional nemesis Apple (AAPL), which has soared with new products like the iPhone and iPad. Apple's market capitalization stands at $231 billion. Microsoft is worth $220 billion.

Apple recently reported revenue of $15.7 billion. Microsoft is expected to report revenue Thursday of $15.3 billion for the last quarter. Microsoft shares remain hovering at about $25, where they've been for the last three years, compared with Apple shares, which have increased by over 60% in the last 12 months.

Desktops Profitable
, Mobile Less So

Microsoft, which has built a dominant position in desktop computer software and systems worldwide, has not been able to translate its success to the Internet -- where Google (GOOG) has carved out the top search advertising business -- or mobile devices, which represent the next front for digital supremacy.

Last month, Microsoft killed its Kin mobile phone, its highly touted entry into the mobile market. Though the company has been falling behind Apple and Google on the mobile front, the Redmond, Wash. software pioneer is still expected to report strong numbers.

"Everyone knows that Microsoft is going to have a pretty big quarter, but there's really not a lot to get excited about beyond that," Toan Tran, an analyst at Morningstar, told Reuters. "We know PCs are doing well so Windows is going to do well. Beyond Windows 7, what does Microsoft have going?"

Tech Looking For a Lift

Microsoft still has a very powerful business, and is expected to report a robust performance Thursday on strong sales of Windows 7, as companies refresh their systems after waiting on the sidelines during the recession. Microsoft's results will reflect solid PC sales to consumers, as well as increased corporate IT spending.

Microsoft's report follows lackluster reports from other tech giants like Google and IBM (IBM). Intel (INTC) was a standout because companies must upgrade their systems after waiting on the sidelines, which should boost Microsoft. Apple is blasting ahead on strong demand for the iPad and iPhone.

Wall Street analysts expect Microsoft net income of 46 cents per share on $15.3 billion in revenue, compared with 34 cents per share on $13.1 billion one year ago.