Software giant and Dow-30 component Microsoft Corp. (MSFT Free Microsoft Stock Report) reported revenue and share earnings for its fiscal fourth quarter of $23.4 billion and $0.55. (Years end June 30th.) The reported figures for the June period included the effect of Nokia Devices & Services (NDS). The overall impact from the NDS acquisition in the quarter was about $2.4 billion in revenue and a loss of 0.06 a share. Our estimates for the fourth quarter, which did not include NDS, were $20.8 billion and $0.61. Setting the financial drag from Nokia aside, most investors were pleased with Microsoft's performance, and showed interest in the potential of the strategy the company is beginning to pursue under CEO Satya Nadella. Microsoft shares advanced modestly in early morning trading.

A quick breakdown of the results from the Devices & Consumer segment show that Windows licensing benefited from the discontinuance of support for Windows XP and that Office 365 remains quite popular. Revenues from phone hardware (Nokia) were about $2.0 billion, with the lion's share of the unit volume coming from non-Lumia devices (lower price points). The company is also making respectable headway with Surface Pro 3, Xbox, and search engine Bing. Meanwhile, the Commercial segment continued to perform extremely well, in our view, benefiting from the company's strong market position in corporate data centers and the move to cloud and mobile computing.

Looking at the broader picture, it seems clear that Microsoft views its strengths in the productivity and platform arenas as key, and that it will use these strengths to pursue the growth opportunities in the quickly evolving cloud and mobile computing markets. At this juncture, the Commercial segment is already having success in this regard, with Azure (infrastructure), Office 365, and Enterprise Mobility Services (EMS). That said, Microsoft's more expansive take on the Windows operating system and its application on a broad range device maker's products should help to broaden its market appeal and acceptance as consumers continue to move away from traditional PCs.

We are now including NDS in our estimates, with our targets for fiscal 2015 now being $102 billion and $2.85 a share, versus our previous calls of $89.5 billion and $2.90. We think revenues and earnings of about $23 billion and $0.60 are within reach for the September period. In sum, we like the direction Microsoft has chosen under Mr. Nadella, and holders of MSFT shares should continue to benefit. That said, recent market support suggests new commitments to the stock should be made carefully.

About The Company: Microsoft Corp. is the largest independent maker of software. It develops and sells products for a wide range of computing devices. The company also sells the Xbox video game console. Revenue sources in fiscal 2013 were as follows: Microsoft Business, 31.8% of total; Windows & Windows Live, 24.7%; Server and Tools, 26.0%; Entertainment & Devices, 13.1%; Online Services, 4.1%; Other, 0.3%. Research & development spending as a percent of 2013 sales was 13.4%.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.