Liveblogging Microsoft's Q3 earnings

5:35pm -- Microsoft's PR head takes the call off to start and intros the Microsoft management team. Colleen turns the call over to CFO Liddell. Here we go...

5:38pm -- with this 32% increase in revenue from Q1 of 2006, what did Microsoft do to goose its revenue so nicely? Windows Vista shipments and Office 2007 shipments apparently. the press disses these products, but apparently they are selling pretty darn well (to OEMs, retail, etc.)? More detail coming...

5:41pm -- Liddell is going over the financial metrics for the quarter, and mentions that Vista and Office 2007 revenue has exceeded expectations so far in the short lives of both products.

5:44pm -- net cash flow from operations was $7.29 billion and Microsoft returned $7.72 billion in cash to shareholders through share buybacks and dividends this quarter.

5:46pm -- Liddell turns the call back over the Colleen to go over the income statement for the Q3 period. Colleen is reading from the press release here (pretty much), so I'm waiting on detailed breakouts of Microsoft's business units. The PC market grew 10-12% during the last quarter (holy cow), which is probably partially responsible for Microsoft's Vista shipments. PC shipments have the single greatest effect on Microsoft's operating systems business, yes?

5:48pm -- some guidance for the current quarter is now being discussed (in general detail):
Microsoft management offers the following guidance for the Q4 period ending June 30, 2007:

• Revenue is expected to be in the range of $13.1 billion to $13.4 billion.
• Operating income is expected to be in the range of $5.0 billion to $5.2 billion.
• Diluted earnings per share are expected to be $0.37 to $0.39.
• Management offers the following preliminary guidance for the full fiscal year ending June 30, 2008:
• Revenue is expected to be in the range of $56.5 billion to $57.5 billion.
• Operating income is expected to be in the range of $22.0 billion to $22.5 billion.
• Diluted earnings per share are expected to be in the range of $1.68 to $1.72.

5:50pm -- Colleen is going over the segmented revenue from all of Microsoft's business units. A 71% increase in the shipments of Windows Vista "Premium" was seen, but other versions of Vista saw declines. I think Microsoft has probably "strongly suggested" that OEMs use the "Premium" version of Vista instead of the "Basic" version (except for low-level and cheaper PCs).

5:52pm -- Colleen is now going over Microsoft's search business (quickly going over details). Microsoft's challenge to Google (or lack thereof) will most likely be an upcoming analyst question sometime in the next 30 minutes.

5:55pm -- over 500,000 xbox 360 consoles were bought during the Q3period, with a total of 11 million consoles sold so far for the xbox 360 product. Colleen continues to go over the income statement...

5:59pm -- Liddell is now going over a bunch of forward-looking stuff for Q4 and for FY08 as well. Lotsof speculation and explanation going on here.

6:07pm -- finally, after a pretty decent deal of bloviating by Liddell, we are getting to the Q&A. First question: why did the Vista "Premium" mix go up this past quarter, and what is the outlook for the future in terms of Vista's OS mix between different versions. Answer: Liddell says the shift between the older XP Media Center edition and the newer Vista Premium edition will change over time (duh), but whether Vista Premium or Vista Business will have the greater share is ongoing (again, duh).

6:11pm -- second question: online services group -- (ah-ha!) -- how will Microsoft grow this part of its business with the OSG unit (online services group). Answer from Liddell: the ad revenue is the best metric to look at, and it grew year-over-year at a 23% rate for Q3 (fro 2006 to 2007). Great -- Microsoft is seeing OSG revenue growth in its search ad business since installing the AdCenter system that feeds text ads on Microsoft's search properties.

6:15pm -- next question: is the Office business (business productivity software) doing well with a 20% growth rate for Q3? Liddell: you bet -- the Microsoft Business Development (MBD) business segment was a "real success story" in Q3.

6:20pm -- next question: the entertainment devices division: what is expected for FY08? With Q3 sales of 500,00 sold consoles, things are looking great for the xbox product. For FY08, taking costs out of the system and selling consoles (with Halo 3 coming out to bump sales even more) along with several hundred million in game software sales and the entertainment division is looking good for FY08.

6:24pm -- next question: is Microsoft "upselling" its "business assurance" to enterprises to upgrade software as well as guaranteed software updates (like upgrades to MS Office, for example)? Liddell: sure -- Microsoft takes every opportunity to sell ore products when inside certain enterprise customers.

6:27pm -- last question: FY08 margins may be flat compared to FY07 margins. What's happened from previous years where operating margins were much higher. Liddell: FY08 will still be an "investment year" for online services while growing Microsoft's revenues of 10-11% for FY08. That is a good starting base for getting a business the size of Microsoft's in the shape it needs to be. Translation: no direct answer about growth of operating margins was given (heh).

6:30pm -- that's it - -the Q3 results call for Microsoft is concluded. Again, the software giant has pulled another great quarter out of its hat. this time next year is when Microsoft's Windows Vista growth will be tallied with a full year behind it.