All right, ladies and gentlemen, here’s the good stuff, at least if you’re a Microsoft employee or stockholder: For its fiscal third quarter, ending March 31st, earnings rose to $4.93 billion, or 50 cents a share, compared to $2.98 billion, or 29 cents per share last year. Total sales increased by 32 percent to $14.4 billion.

Indeed, Microsoft earned a whole lot of cash, most likely because of the arrival of Windows Vista and Office 2007, which gave them something new to sell.

So you’d think the company is in wonderful shape, and indeed their stock price jumped $1.05, to $30.15 per share, in after-hours trading. Clearly Wall Street likes the numbers, although not quite as enthusiastically as Apple’s.

On the other hand, when you look past Windows and Office, things aren’t quite so rosy. Take the Xbox 360 game and the Zune music player, which, together, showed a 21 percent decrease in sales to $929 million. As a seasonal decline, maybe that’s not a whole lot. But the problem is that these products have yet to become profit centers. This is particularly true with the Xbox, which has cost Microsoft billions of dollars since it was released.

Of course, with its huge hoard of money, Microsoft can afford to subsidize these products for years and not seriously suffer from the ongoing investments. Certainly, you have to admire their optimism, that they believe in these ventures and hope that some day, maybe not this year or the next, the Xbox will be a cash cow and the Zune will make a serious dent into the iPod’s market share.

You can certainly understand that Microsoft realizes it can’t sustain itself until the end of time on Windows and Office, plus related products, and that they need to diversify. However, are they doing all they can to move beyond their core businesses?

Well, the Xbox has surely gotten good reviews, and millions of gamers love them. The worst you can say, perhaps, is that Microsoft is taking the same tact as a printer maker. They sell the basic hardware for the lowest price possible, and depend on the sale of the things you need to use the product to make profits.

With the Zune player, you have to wonder, though, just what Microsoft is thinking by selling the player at a loss. If you can believe what Apple says in its financial reports — and there’s certainly no reason not to — Apple makes a ton of money from the sale of every single iPod. They never lose a dime from anything they sell!

So, other than being competitive, or mostly competitive, why would Microsoft take a loss on every single Zune it sells? Where are the profits coming from? Well, I suppose there’s the music, right? They’re taking the same approach as with the Xbox, hoping to make up the difference at the Zune Marketplace.

That business plan, however, is questionable. The nasty truth is that the profits from iTunes are relatively small in the scheme of things. Surely they’re not enough to subsidize the sale of iPods, and, fortunately for Apple, it’s not necessary.

So why can’t Microsoft, a much larger company than Apple, keep its expenses down so that it doesn’t take a loss on every Zune it sells? Well, there are those economies of scale, of course. Apple moves far more product. In addition, Microsoft has taken the bullet-point approach in creating products, which is to add features the competition doesn’t have. In this case, a built-in FM radio and Wi-Fi.

These two subsystems clearly add to production costs, and it’s hardly certain that they have impacted sales all that much? I mean is Apple wrong not to have an FM tuner in the iPod? After all, they’re available from third parties as add-ons if you need them.

Wi-Fi? Well, I suppose there might be a benefit in being able to send and receive content, but the feature is so crippled on the Zune, you have to wonder why it is even offered at all? In case you haven’t been following this — and why would you? — it’s because the tracks you squirt to a fellow Zune player, assuming one can be found, are overlaid with a time bomb. Three plays or three days, whichever comes first, and they’re useless.

So, yes, Microsoft is doing well enough to keep its people happy. But on a long-term basis, there are troubling signs. They’ve yet to learn, for example, that you can’t create hot new products that people lust after with committees and marketing departments. Something has to change. The question is whether Microsoft’s emerging new leadership understands that, or whether they will continue on the long road to eventual irrelevance. Not this year, or the next, but five or ten years from now, things just won’t be the same.

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While considering what I was going to write once Apple’s quarterly financials were released, I thought of what I had said previously, that sales and profits would exceed Wall Street expectations, and that the financial community would react in its usual unpredictable fashion.

Over the past few months, it has been variously claimed that sales of Windows Vista would eat into the sales of new Macs somewhat, all without any real evidence, or that sales would otherwise stagnate. But as reports of first quarter PC sales appeared, it was clear Apple would do far better than expected.

Indeed, Apple has reported their most profitable March quarter in the company’s history. According to their statement for the fiscal second quarter, sales were $5.26 billion, compared to $4.36 billion last year. Net profit was $770 million, or $.87 per diluted share, compared to $410 million, or $.47 per diluted share last year.

Rather than bore you with lots of raw numbers, let me point you to Apple’s site where you can read the official figures for yourself. I’ll refer to some of them, but I’ve a lot more to say about what they mean.

Take the iPod, which a lot more people did, as some 10.5 million were sold. Mac sales amounted to 1.52 million, again surpassing what many analysts had expected. The largest portion of those numbers went to notebooks again, amounting to 891,000. Unfortunately, Apple doesn’t break down sales among models as it used to, so we’re only left to guess how many MacBooks and MacBook Pros were apportioned across those figures. I’ll have to assume more bought the former than the latter, strictly on affordability alone.

Indeed, with computer sales growing at 36 percent, it doesn’t appear that the arrival of Windows Vista has made any perceptible dent on sales of new Macs. And there has, so far at least, been no noticeable pause because Mac users eagerly await the arrival of Leopard, and don’t want to pay an upgrade fee of $129 or greater.

In fact, I often wonder just how much the operating system counts these days, now that Mac OS X seems to work so well for so many people. These days, the recent arrival of Adobe’s Creative Suite version CS3 probably accounts for a far greater impact, particularly among Mac creative professionals who have been waiting patiently for the Intel-savvy versions of InDesign, Photoshop and all the rest.

Oh yes, there’s that cash hoard that Apple’s been sitting on for so many years. It’s currently at $12.6 billion, and there are no immediate plans to do anything with it. I wonder how many stockholders are beginning to feel they deserve their cut, unless, of course, Apple can define some crucial reason for keeping so much cash at hand.

As far as the current quarter is concerned, Apple’s guidance is again very conservative, promising total sales of “about $5.1 billion and earnings per diluted share of about $.66.” And, once again, they look to beat those predictions.

Surely Wall Street took immediate notice. Apple’s stock price soared to over $100 per share in after-hours trading, and I just wonder how long it’ll take for the price to reach $125, unless, of course, Apple’s board decides on another stock split.

There is just one more thing to add, and that’s a statement made by Apple’s Board of Directors that they stand behind their man — Steve Jobs — and that they aren’t “going to enter into a public debate with Fred Anderson or his lawyer” over claims that Anderson was simply following the orders of his boss when he engaged in that stock options backdating affair.

In any case, Anderson has apparently paid his SEC bill, and there’s little to indicate that Apple faces much more in the way of serious inquiry in the months to come.

I think most of you are probably more interested in the iPhone, which is still reportedly on track for a June release. Brand new Macs and Mac OS 10.5 Leopard don’t seem to be near as important these days. It’s not that Apple is no longer interested in personal computers or operating systems. But everything seems to be chugging along so nicely that perhaps the pressures to stay ahead of the competition have subsided.

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