Hey Microsoft, how is Windows Vista doing? From many respects, the new operating system has deflated already, with initial exuberance being passed over for staid boringness. That is, until the new OS finds a lot of homes on all those new PCs that will keep shipping. With the Microsoft earnings preview earlier this week looking an a $0.46 EPS figure for Q3, we'll see if Vista has has the chops to help get ole' Softie up to that number for the latest full quarter.

With Microsoft's expectation today to see a Q3 EPS figure of $0.46, or $4.5 billion in net income, the software giant continues to see piles of cash coming in. Will this continue? Hard to day. But, Microsoft continues to chug along every quarter while gloom-and-doom scenarios continue to be bandied about relentlessly.

With that said, let's see what Steve Ballmer and company (CFO Chris Liddell, to be exact) have to say. Remember to use the "Refresh" button on your web browser to ensure you're seeing updates every few minutes. All times below are in EST.

5:30pm -- waiting on hold for the webcast to start. Listening to the theme of "Titanic" set to piano (twiddles thumbs). Check out the official Q3 numbers here before the liveblog starts.

5:32pm -- here we go. Microsoft's Q3 webcast begins. Microsoft beat expectations with $0.50 EPS, revenue of $14.40 billion and and net operating income of $6.59 billion ($4.93 billion in net income). Wow -- very impressive results here. Like I've stated, Microsoft keeps chugging along with growth despite tons of negative press and some lackluster pieces of its PR pie.

Microsoft Corp. (NASDAQ:MSFT) will report its first fiscal quarterly earnings after the close today, and the webcast is scheduled for 5:30 p.m. ET.

Investors and analysts will look at three main business segments: Microsoft applications, gaming and the online division.

• After many delays, Microsoft is finally about to launch its new operating system, Windows Vista. Investors are quite bullish on Vista, expecting higher PC sales and higher licensing income as a result. Also, Microsoft's new version of its Office application should be ready next year.
• Xbox 360 - another bullish outlook. Xbox is expected to gain market share in the coming year, mostly from PlayStation. And while Microsoft still loses money on Xbox sales, these losses are expected to diminish and eventually disappear.
• Finally, the online division. Microsoft has rolled out its Live version and the Live search. However, competition here is strong.

Other issues:

• Zune - while most don't expect Microsoft to make significant strides at first, investors are upbeat about the product
• Web 2.0 - what could the impact of online applications do to Microsoft suites of product?
• Cash - investors are eager for Microsoft to do something with its big cash reserve.

As you can see, most of the issues are very forward-looking, indicating investors wouldn't put much emphasis into this quarter's numbers, but will look at the plans and the indications going forward.

In numbers: Consensus for this quarter is for 31 cents earnings per share on $10.8 billion in revenue.

At $28.17, MSFT stock had a good run since June, up over 20%. It is now near its 52-week high.

Here's another preview from TheStree.com.

5:27 p.m. While I'm waiting on hold for the Microsoft earnings call to begin, I keep checking the stock price in after-hours tradiing. It's at $25.64 right now, down over 5% from the close and edging ever closer to a 52-week low. I'm just starting to review their third-quarter 10-Q and I'll include comments as I listen in.

5:32 p.m. We're still on hold (guess all the reporters didn't call in at least 10 minutes ahead of time, as requested) and I'm noticing that cost of sales was way up - 66% 49% higher - from 3rd quarter 2005 to 3rd quarter 2006. G&A is down about half this much. What happened with that $665 million?

5:35 p.m. After a very scripted introduction (sounded like it was recorded by a computer and not a person), we hear that Microsoft "choose the right places to focus" with their SQL server sales, for instance, and is "ramping up the supply of Xbox 360 consoles."

5:38 p.m. Expect an increasing set of opportunities and challenges with regards to product launches like Xbox 360 consoles, and home entertainment sales are up 85%.

5:46 p.m. Continue to see a shift in "premium edition" OEM sales of MS software. They can't say enough about SQL servers. She puts extra emphasis on every adjective when she talks SQL.

5:47 p.m. Pleased with the great response that Office Live has received.

5:49 p.m. MSN revenue down - but advertising revenue up slightly, especially in instant messaging properties. "Made good progress" in transitioning search advertising from the Yahoo! platform to proprietary ad platform - and lower-than-expected performance from partner-driven ad search volume. Doesn't look like it's working as planned although they say that they're sure it was the right decision. Hmm.

Microsoft's third quarter earnings are out as of 10 minutes ago, and revenue is strong - up 13% to $10.9 billion. The big story is the big miss, however; the company earned only $0.32 a share, or $2.98 billion. That's a penny off analyst estimates of $0.33. Revenues were up, they say, thanks to business management and database software sales.

The big question on everyone's minds: what difference will a penny make? Not much, it seems, as MSFT is already up 18 cents in after-hours trading. Update: urggh. Investors not so happy anymore. The tide has reversed and now the stock is down $1.35 since market close to $25.75. More later...

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