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SEATTLE (AP) -- Consumers may be shopping for computers again, but Microsoft Corp. still needs businesses to start accomplishing the same.

Microsoft said Friday its acquirement kept falling and its net income alone 18 percent in the last quarter, partly because of the hesitation of businesses, which are added assisting for Microsoft than consumers are.

Big cost cuts at Microsoft made a difference, though, helping the aggregation bear balance well above analysts' expectations. Its stock surged $1.29, nearly 5 percent, to $27.88 in afternoon trading. Earlier in the day, the stock reached a 52-week high of $29.35.

But while the quarterly after-effects looked acceptable to Wall Street, they also showed how abundant Microsoft is still wrestling with a PC industry that remains abundant weaker than a year ago. In the accomplished year the software maker resorted to its aboriginal wide-scale layoffs, and in July it said its annual acquirement had collapsed for the aboriginal time back the aggregation went accessible in 1986.

After skidding for six months, computer shipments rose in the July-September period. But shoppers tended to buy inexpensive laptops and alike smaller, cheaper netbooks, which accept older and less assisting versions of Windows installed. Many consumers also passed on affairs Microsoft's Office, the package that includes Word, Excel and Outlook, which contributed to a 14 percent total decline in acquirement in the quarter.

Businesses watched their spending alike added closely. That abject bottomward Windows after-effects because business-level versions of the operating arrangement are added expensive. And companies that accept cut workers are ordering beneath copies of Office and added Microsoft software frequently acclimated at work. Revenue and profit in the group that! makes O ffice sank alike as businesses spent added on newer software such as Sharepoint.

Chris Liddell, Microsoft's chief financial officer, said in a appointment call that businesses could start replacing aging PCs and servers starting in 2010, "although it could be gradual and occur over a brace of years."

Other companies, especially Intel Corp., accept adumbrated they expect things to advance faster, in the accepted quarter.

Microsoft's balance in the last division alone to $3.6 billion, or 40 cents per share, though that was abundant college than the analysts' appraisal of 32 cents per allotment in a Thomson Reuters survey. In the same aeon last year Microsoft earned $4.4 billion, or 48 cents per share.

Microsoft's bottom line was aching by a summer program in which the aggregation let bodies buy a PC with the Windows Vista operating arrangement and afterwards install Windows 7 on the machine for free. That meant Microsoft counted alone bisected of its Windows sales in the aeon and will report the rest as customers upgrade to Windows 7, which was appear this week, through January, when the action expires.

If it had counted its deferred Windows revenue, Microsoft's balance would accept added 8 percent from last year.

Revenue sank to $12.9 billion, though if Microsoft had counted all the Windows sales, it would accept acquaint a smaller 4 percent bead in revenue, to $14.4 billion.

A big acumen that Microsoft's balance would accept increased, if not for the Windows deferrals, despite lower acquirement is that layoffs and added amount cuts are advantageous off. Microsoft employs 4 percent beneath bodies than a year ago and has spent less on marketing and outside contractors, pushing operating costs bottomward added than $600 million compared with a year ago.

Microsoft said costs in the accepted fiscal year, ! which en ds in June, could be as abundant as $400 million lower than ahead expected.

The aggregation also lifted its balance per allotment by resuming purchases of its own stock afterwards a six-month pause, spending $1.45 billion in the quarter.

Even with the buybacks, Microsoft managed to sock away plenty of cash. The aggregation said its cash and short-term investments that could be quickly converted to cash totaled $36.7 billion at the end of the quarter, up from $31.4 billion at the start.

REDMOND, Wash. (AP) -- Although no one waits in long lines for a new edition of Windows anymore, the debut of Microsoft's latest software that runs PCs is part of why buying a computer is starting to feel fun for the first time in years.

Windows 7 is expected to work better than its predecessor, Vista. At the same time, Microsoft's marketing has gotten savvier and PC makers have followed Apple Inc.'s lead by improving hardware design. Computers with the Windows operating system suddenly seem a lot less utilitarian.

"If you line up the six or seven most interesting PC designs, people will say, `Wow. I didn't know all of that could be done with a PC,'" Microsoft CEO Steve Ballmer said in an interview.

Windows 7, which becomes available Thursday, is designed to look cleaner than Vista, streamlining the ways people can get to work, with fewer clicks and fewer annoying notifications. Setting up home networking to share photos and music won't require an advanced degree in information technology. Plugging in a new device won't set off a mad hunt online for driver software, which tells the equipment how to work with an operating system.

Making a version of Windows that people like, rather than tolerate, is critical for Microsoft. Most people don't choose Windows as much as they end up with it, because it's familiar and affordable. But it's conceivable Microsoft will have to work harder to win people over, thanks to a small but growing threat from Apple's Macs and a forthcoming PC operating system from Web search nemesis Google Inc.

Vista fell flat because it didn't work with many existing programs and hardware. Microsoft fixed many of Vista's flaws but didn't spread the word, instead allowing Apple to attack with ads that pit a dorky office stiff (PC) against a casual creative type (Mac) an! d paint Vista PCs as unjustifiably complex.

It took a while, but Microsoft finally fired back. It hired Crispin Porter + Bogusky, a hip advertising firm, and set aside $300 million to portray Windows as warm and human. The "I'm a PC" campaign that emerged isn't universally well-liked, but the ads have arguably transformed the face of Windows from a pasty nerd to an adorable little girl named Kylie who e-mails pictures of her pet fish to her family without help from a grown-up.

Windows 7 also is arriving in the early days of a golden age for PC design.

For years, Apple has been making computers for people willing to pay a premium for design: sleek, metal-encased laptops with brilliant screens; swanlike iMacs that stash the workings of the computer behind an enormous flat monitor, perched atop a minimalist base; the MacBook Air notebook, thin enough to fit in a manila envelope. Meanwhile, the most notable shifts in PCs have been from beige plastic to black, or from chunky square notebooks to ones with slightly rounded edges.

Now, PC makers are starting to experiment with size, shape and color at all price levels.

Netbooks, the tiny, inexpensive, low-powered laptops that have been the PC industry's saving grace through the recession, are no longer just shrunken corporate PCs. To entice people to slip them into a purse and carry them everywhere, netbooks are made in a rainbow of colors and array of textures. Microsoft stumbled by making Vista too lumbering to run on netbooks, but even premium versions of Windows 7 will work on the little devices.

Even mid-range notebooks, costing $500 to $800, now have enormous screens and custom covers. At the higher end, PC makers have adopted Apple's thin-and-light concept and etched patterns into sleek metal cases.

Windows 7 feeds into this design craze in part by adding deeper support for touch-scre! en contr ols, leading such PC makers as Dell Inc. and Hewlett-Packard Co. to add "multitouch" screens that respond to finger gestures.

The plummeting cost of memory and computing power make this shift possible. Now any computer is good enough to surf the Web and do most daily tasks, because nearly all have fast processors and massive hard drives. So instead of racing to provide the most gigahertz or gigabytes, PC makers are zeroing in on aesthetics.

"Design has come to be the distinguishing feature," said Jonathan Thayer, an industrial design professor at Pratt Institute in Brooklyn, N.Y. "Cost and quality are really not the variables that they were."

PC makers plan to unveil their latest in colorful and lightweight machines Thursday, an orchestration that was possible because Microsoft coordinated with PC makers earlier than usual.

This is "a very different Microsoft," said Alex Gruzen, an executive in Dell's consumer PC division. Gruzen said his team worked closely with Microsoft to fix things people didn't like about Vista - such as its slow boot-up time - rather than waiting, as in the past, for the software maker to "just throw the (operating system) over a fence" for Dell to install on PCs.

Part of Apple's success stems from having control over both hardware and software. By better aligning those components, Microsoft and computer makers could get some of the same benefits, and cooler PCs could squash Apple's gains. Apple now has 11 percent of the U.S. personal-computer market, up from 5 percent when Vista debuted, according to analysts at IDC.

Apple announced new iMacs this week but brushed off the suggestion that the timing was intended to steal some of Microsoft's thunder.

"Windows 7, from our point of view, is just another opportunity to remind everyone to switch to a Mac," said Apple Chief Operating Officer Tim Cook. "Peopl! e are si ck of all the headaches that go along with Windows."

Microsoft has more to contend with than computers running other operating systems. People have begun to use such gadgets as the iPhone as tiny mobile computers.

But Ballmer scorns the idea that smart phones could unseat PCs as the technology of choice for on-the-go consumers.

"Let's face it, the Internet was designed for the PC. The Internet is not designed for the iPhone," Ballmer said. "That's why they've got 75,000 applications - they're all trying to make the Internet look decent on the iPhone."

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