Microsoft

clipped from www.nytimes.com The company’s profits rose for the quarter based on strong PC sales in developing markets and rising demand from corporate customers. The company reported a net profit of $4.3 billion, or 46 cents a share, in its fiscal fourth quarter ended June 30, versus a profit of $3.04 billion, or 31 cents, in the same period a year ago. Analysts said the company’s business appeared sound, but that it appeared to have lost control of expenses during the quarter. “Where did they spend all this money?” said Brendan Barnicle, a financial analyst at Pacific Crest Securities in Portland, Ore. Sales and marketing, cost of revenue and research and development were all above what analysts had predicted, he said. “This was significantly higher than people expected.”

Maybe too much R&D playing Grand Theft Auto IV on the XBOX 360. If you check the link, you'll notice that MSFT's "smartphone software" is still not profitable. I think that's going to be tough going foward up against the iPhone, as Apple gains market share.