Software giant Microsoft (NASDAQ: MSFT) is expected to post earnings for its second quarter next Thursday, as one analyst points towards strong sales of the company's game-console and new operating system to help fuel the company's revenue.

Microsoft's Xbox 360 game console outsold rivals this holiday season, with market research firm IDC reporting cumulative sales of 10.4 million units at the end of 2006. Experts from investment bank Friedman, Billings, Ramsey had predicted sales of only 10.2 million.

With a strong holiday season, we believe the Entertainment and Devices division could beat our revenue estimate of $2.78 billion, which represents growth of 68 percent year-over-year, said the investment bank's David Hilal.

Hilal noted however, that while better than expected console sales could drive higher revenues, impact on the bottom line will not be significant.

What may play more into the Redmond Wash.-based company's earnings is the launch of its new Window's Vista operating system. The new software is expected to hit consumer shelves on January 30, however copies have already begun shipping to corporate partners, such as Dell Computers, (NASDAQ: DELL), and HP (NYSE: HPQ).

Hilal said that the firm expects a strong showing in the December quarter from Microsoft's Client division, which sells Vista. He added that healthy PC sales and increasing uptake of Vista would contribute to helping meet revenue and Vista adoption expectations.

We believe with Vista, Microsoft is embarking on a significant multiyear, multi-product cycle that should drive accelerating revenues and even better earnings growth, Hilal continued.

The firm expects Microsoft's Client division to reach revenues of $2.58 billion in the December quarter and $16.26 billion through 2007.

The firm maintains a Outperform rating on the company, with a $35 price target.

Shares of Microsoft edged slightly higher in afternoon trading, rising 0.06 percent, or $0.02 to $31.03.

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