Corporate IT spending propelling Microsoft could propel peers too

As I have previously mentioned , the greatest intangible that Microsoft possesses is its enterprise relationships. While pundits have hailed the end of the PC area amidst a huge surge in tablet sales, Microsoft Q3 earnings were especially strong in the enterprise. The Server and Tools and the Business division revenues both grew an impressive 14 percent highlighting how much 'safe' and long-term revenue it receives from the corporate world, which constitutes for about 67 percent of operating earnings.

This might be shocking to some but Microsoft is mostly an enterprise company, just like Oracle, HP and Dell although the latter tend to face much more competition in the hardware space. What these results also show is that corporate IT spending is still strong despite the current economic uncertainty. The best way to increase productivity is to innovate and this is what companies are doing, they are innovating through better technology and technology companies are reaping the rewards.

Microsoft's beat along with IBM's and other tech companies' strong earnings season performance supports the continuation of the technology rally. Although much focus has been on Apple carrying the rally, we can still see that the big corporate tech giants have had a great Q1. And as our Equity Strategist, Peter Garnry pointed out, the IT sector is and continues to be an undervalued high growth sector.

 And for other Microsoft nerds like myself, here is a quick word specifically on the Q3 results of the other divisions:

Windows division grew 4 percent, mostly through corporate uptake, although the consumer PC market still remains subdued. The Windows division should do well until 2014, not counting Windows 8 results, as Microsoft will stop supporting Windows XP and corporations and consumers will need to upgrade to Windows 7 or 8.

The Online Services division aka as Bing, the black hole in an otherwise pristine income statement grew earnings by 6 percent and reduced losses by close to 40 percent. Microsoft is slowly approaching the 20 percent market share it needs to break even. Questions remain as to whether the investment in Bing will ever pay off...

All in all, Microsoft had a great quarter which could give the stock a lot of momentum towards the launch of Windows 8.