The stars are starting to align at Microsoft (Nasdaq: MSFT).

The world's largest software company delivered market-thumping results to close out its 2010 fiscal year. Quarterly revenue climbed 22% to $16.04 billion, as expanding margins treated bottom-line buffs to a 48% advance in net income to $4.52 billion, or $0.51 a share.

Analysts were betting on a profit of only $0.46 a share with a 17% uptick on top.

Record revenue during the quarter helped wash away the bitter aftertaste from its third-quarter results -- where strength in its Windows 7 rollout was the only thing separating Mr. Softy from an embarrassing decline in revenue. It was a team effort this time, with all five of Microsoft's divisions growing on the top line.

This doesn't mean Microsoft's report is perfect. Despite the market-rattling allure of Bing, Microsoft continues to lose money on the Internet like an online poker addict. Its Xbox-driven entertainment arm -- flush with profitability during the first nine months of the fiscal year -- reverted to its red-inked ways during the quarter.

Microsoft has sold 175 million Windows 7 licenses since the operating system's launch. Last week's better than expected results out of computer chip makers Intel (Nasdaq: INTC) and AMD (NYSE: AMD) all but confirmed a healthy interest for new computers with Microsoft's latest operating system preinstalled. With its springtime introduction of Office 2010 out of the way, Microsoft turns its attention to its Xbox Kinect and Windows Phone 7.

It better hope it's not too late on both fronts.

Kinect is a motion-based controller system hitting the market in November with a stiff $150 price tag. Buzz over a new system and Kinect-ready games could give the moribund gaming industry a significant boost -- especially for real-world retailer GameStop (NYSE: GME) -- but it may be an uphill battle to convince gamers to pay so much for just a camera-based controller.

If Kinect has a hill to climb, Windows Phone 7 will have a mountain to scale. Every day that passes finds Google (Nasdaq: GOOG) activating another 160,000 Android devices. Apple (Nasdaq: AAPL) and Research In Motion (Nasdaq: RIMM) have had even longer to carve out their audiences.

Mobile may not seem like an important part of Mr. Softy's empire, but it will be now that tablets leaning on Apple's iOS and Google's Android are dominating the release calendar and threatening to eat into the laptop and netbook markets. Despite Microsoft’s decadelong fascination with the tablet, Research In Motion might even beat them to having a modern, viable tablet concept. Ouch.

Microsoft took the first step in silencing my bearish bent with last night's impressive quarterly report. Now, all it needs is to have a hit in either Kinect or Windows Phone 7 to turn me into a believer.   

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