Microsoft Corp's quarterly profit and revenue beat Wall Street expectations, sending shares of the world's largest software maker sharply higher on Friday.

COMMENTARY

LAURA DIDIO, ANALYST, ITIC

If you have a wounded animal and you corner it, that is when it is at its most dangerous. Microsoft knows that its core businesses are under siege from competitors as powerful as they are -- IBM Google, Apple and others. They can swing into action when they have to. They have considerable resources to bring to the table.

LAXMI PORURI, FOUNDING PARTNER, PRIMARY GLOBAL RESEARCH

Probably the PC picked up because of what Intel said that the fourth quarter and going forward is slightly up from what was previously forecast. They're seeing not a recovery, but a little bit of a turnaround.

They're going to be well positioned to take some share away on the server side and as well on the content management side.

We think Oracle reported a disappointing quarter recently largely because they're going to be struggling with their acquisitions a bit in terms of how they're going to integrate some of their technologies. So we think Microsoft has a pretty good opportunity going forward in the next 12 to 18 months to take some share away on that end.

RICHARD WILLIAMS, ANALYST, CROSS RESEARCH

This was stronger than we anticipated. Gross margin improved, operating margin was a little weaker than anticipated, but the strength seems to have come from server tools. And online was a little bit better. Entertainment was a lot better.

As for the stock today, we've seen it: It jumped a lot.

I think Windows 7 will be more popular than has been generally expected. I think it will kick in faster than Vista or XP, but having said that it will be the March quarter before we see it.

KATHERINE EGBERT, ANALYST, JEFFERIES & CO

Microsoft is back. They are able to succeed despite heightened competition from Apple's share gain and Google's great brand.

The numbers were unbelievable. An absolutely blowout. Crazy good.

Every division is solid, including Windows, which is where people thought there would be some slowdown ahead of the Windows 7 upgrade cycle.

There is a lot of PC buying going on.

The most upside was probably in the entertainment area, which is Xbox. There was about $300 million in upside.

In cost controls they reported a really good operating margin and they guided down their op-ex for the year.

BENNETT GAEGER, MANAGING DIRECTOR OF LISTED EQUITY TRADING, STIFEL NICOLAUS CAPITAL MARKETS

They moved the market. They came in with expectation set they were going to be a little soft this quarter in front of the Windows 7 release. The fact they came out and exceeded both the top and bottom line has fueled this move higher.

This was their first big product release in some time, a lot of people were looking for this quarter to be not quite as strong, you see the huge revenue upside, big EPS beat, they are taking their operating expense guidance lower. All in all they are setting up for a stronger move with this release of Windows 7.

BRENDAN BARNICLE, SENIOR ANALYST, PACIFIC CREST SECURITIES

You are seeing some of the benefit of the improvement in PCs that we have heard about, also some of the benefit is improvement in server unit sales, and you have a huge improvement in Xbox.

This is a trend. They've got some good momentum behind them and it's just going to get accelerated now that you have Windows 7 out in the market.

I had lower numbers and I thought we may get some upside, but not this much. These are fantastic numbers.

(Reporting by Juan Lagorio, Chuck Mikolajczak, Paul Thomasch, Jim Finkle and Leah Schnurr, compiled by Tiffany Wu)

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