Microsoft Corp surprised Wall Street with a better-than-expected profit, but its shares stayed flat as investors expressed concern about the weakness of computer sales amid a faltering U.S. recovery.

The world's largest software maker, whose Windows operating system still runs on 90 percent of the world's computers, is heavily dependent on PC sales, which grew only 3 percent in the quarter, and is starting to feel competition from Apple Inc's iPad.

Outstanding numbers when you take a first look at it but when you delve into them, Windows missed expectations by $300 million, said Brendan Barnicle, analyst at Pacific Crest Securities.

Microsoft said sales of its core Office application rose 24 percent, indicating that U.S. businesses are starting to spend more on technology after the recession, but consumers are proving less resilient.

Initial jobless claims surged to 454,000 in the latest week, rising to the highest level since late October, indicating that any recovery in consumer spending will come in fits and starts.

Meanwhile, sales of smartphones and tablets are expected to grow much more quickly than PCs over the next few years, posing a threat to Microsoft's key market.

Microsoft reported fiscal second-quarter profit of $6.63 billion, or 77 cents per share, compared with $6.66 billion, or 74 cents per share, in the year-ago quarter. The per share figure was higher due to a reduction in shares outstanding from last year.

Year-ago profit was boosted by a one-time deferral of revenue from the launch of its Windows 7 operating system.

Wall Street was expecting 68 cents per share profit, according to Thomson Reuters I/B/E/S.

Sales rose 5 percent to $19.95 billion, helped by strong sales of its Kinect hands-free gaming system, handily beating analysts' average estimate of $19.15 billion.

Microsoft's shares were down slightly in after-hours trading, after rising briefly on Nasdaq after the earnings were posted on the company's website. They are down about 3 percent over the past 12 months.

(Reporting by Bill Rigby; Editing by Phil Berlowitz)

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