Earnings Preview: Focus on PCs in Microsoft's 3Q

SAN FRANCISCO (AP) -- Microsoft's latest quarterly report will give the software maker another opportunity to persuade investors that its efforts to redesign its products for mobile devices are heading in the right direction, despite recent evidence that the attempted transformation isn't paying off.

WHAT TO LOOK FOR: The results, due out after the stock market closes Thursday, cover Microsoft's first full quarter selling Windows 8 — the most radical overhaul of its personal computer operating system since the mid-1990s.

Windows 8, released in late October, can be controlled by touching a display screen, as well the more traditional use of a keyboard or computer mouse. Microsoft hopes to make its software more appealing for tablet users while still retaining enough features from previous versions of Windows to run software primarily used on desktop and laptop machines.

Microsoft says it's happy with the initial response to Windows 8, but many on Wall Street have been disappointed with what they have seen so far. The research firm International Data Corp. believes Windows 8 is so confusing that the new operating system has deepened a yearlong decline in the sales of personal computers, which aren't being replaced as frequently as more people embrace smartphones and tablets. Worldwide PC sales fell by 14 percent during the first three months of the year, the steepest quarterly decline recorded since IDC began tracking the market in 1994.

Those numbers don't bode well for Microsoft, which still relies on its Windows franchise for about one-fourth of its revenue. The company, which is based in Redmond, Wash., also sells other popular software, such as word processing, spreadsheet and email programs, as well as online advertising, the Xbox video game console and various technology tools that help manage other companies and government agencies.

A conference call scheduled to discuss the company's fiscal third-quarter performance will give Microsoft a chance to explain why it believes Windows 8 and other recent changes to its Office software and webmail service will pay off for the company. Reflecting widespread investor skepticism, Microsoft's stock price has risen by just 3 percent since Windows 8's release, while the Standard & Poor's 500 index has surged by 10 percent.

Shares of Microsoft Corp., which closed Monday at $28.69, edged higher in premarket trading Tuesday.

Analysts on Thursday may press Microsoft for more details about the response to its Surface tablet, which is supposed to showcase the appeal of Windows 8. Microsoft so far hasn't released any data about Surface sales, feeding speculation that the device isn't faring well against the iPad or competing tablets that run on Google Inc.'s Android software.

The second-guessing about Windows 8 has amplified the pressure on Microsoft CEO Steve Ballmer, who doesn't usually participate in the company's conference call about quarterly earnings. That, as usual, wik be handled by Chief Financial Officer Peter Klein.

WHY IT MATTERS: Microsoft is the world's largest software company, and it's one of the 30 heavyweight companies that make up the Dow Jones industrial average.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect Microsoft to earn 68 cents per share on revenue of $20.54 billion.

LAST YEAR'S QUARTER: Microsoft earned $5.11 billion, or 60 cents per share, on revenue of $17.42 billion at the same time in 2012.