Thinktechno.com

For the fiscal second quarter, the software giant is expected on Thursday to report earnings of 23 cents a share on revenue of $12.9 billion, according to analysts' estimates compiled by Thomson Financial. Microsoft posted earnings of 34 cents a share on revenue of $11.84 billion for the same period a year ago.

The disconnect between the second-quarter lower earnings yet higher revenue comes as a result of Microsoft's upgrade promotion to Vista from Windows XP. Under the Vista "Express Upgrade," users who purchase a computer with XP or Office 2003 will be eligible for an upgrade to Vista or Office 2007 at a steep discount or for free.

As a result of the program, which spans five months and ends March 15, Microsoft cannot claim revenue booked under this program until the users take advantage of the vouchers or coupons, said Charles Di Bona, an analyst with Sanford C. Bernstein.

The size of this revenue deferral is $1.5 billion.

In March, Microsoft announced the delay of Vista, noting it would miss the holiday selling season and ship the following year. The company started selling Vista and Office 2007 to business customers in November. The products will be available to consumers on January 30.

That delay caused Microsoft to inform Wall Street that its second-quarter earnings would be in the range of 22 cents to 24 cents a share when it announced its first-quarter results in October. At the time, analysts' estimates were 34 cents a share.

Pranjal