Investors bullishly indifferent to Microsoft's record Q1 revenue

Shares tread water in Friday trading after company reports 7% sales increase

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What does Microsoft have to do to impress Wall Street?

The software giant turns in record first-quarter revenue and a 6% increase in profits from the year-ago quarter in a tough economy. And how do investors react? They yawn!

Shares of Microsoft (NASDAQ: MSFT) were up only 11 cents, or 0.4%, to 27.15 in Friday morning trading.

But the truth is, Wall Street's reaction is entirely rational because Microsoft's biggest revenue drivers -- its Windows operating system and Office products -- face uncertain futures in an increasingly open source, cloud-based and mobile world.

It also doesn't help that the company is run by a guy with a propensity for unhinged rants and a history of making laughable market predictions. If only Microsoft could monetize CEO Steve Ballmer's no-nothing cheap shots at competitors, its share price might actually end its decade-long purgatory in the 20-something dollar range.

While Redmond's Office suite did reasonably well in Q1 -- sales increased 8% to $5.62 billion, though net income gained only 5.7% -- Windows continues to suffer as PCs lose sales to tablets and smartphones, two decidedly Windows-unfriendly device platforms.

Revenue for Microsoft's Windows division grew only 2% to $4.86 billion and actually declined 1% from a year ago.

Those two units comprise 60% of Microsoft's revenue. How will Redmond make up for the slowdown in growth of its two largest and most mature businesses? It's not going to be with sales of Xbox, I'll tell you that.

It's cloud business has potential, but that's an increasingly crowded market in which Microsoft has no particular edge over competitors.

Then there's mobile. The company is way behind, and for all of Ballmer's trash talk about Android, Redmond has done nothing to prove it can produce a legitimate contender to battle against Google's smartphone OS and Apple's iOS.

The bottom line is that Microsoft looks to investors like a company whose best days are behind it, and Redmond's first-quarter numbers did nothing to alter Wall Street's opinion, Ballmer's recent bellowing notwithstanding.

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