Microsoft Chief Financial Officer (CFO) John Connors told analysts yesterday that stock valuations and corporate profits are stabilizing in the tech industry, a situation that will lead to a tech stock rebound and a reversal of the current economic downturn. The unexpectedly rosy prediction from an executive at the ever-cautious software giant comes just weeks after the company revealed that Windows enjoys a stellar 85 percent profit margin. But Connors again downplayed Microsoft's record results from the previous quarter, when the company posted a 26 percent sales increase and more than doubled its year-over-year profit, calling the quarter an "anomaly."

Connors said that Microsoft is poised for great success, although the company still expects growth to fall to single digits in the coming quarters. Linux could derail Windows' success, however. Connors said that any Linux success on the desktop would have catastrophic results for Microsoft because its PC preloading business is such a "phenomenal annuity stream of cash flow and profits."

Linux hasn't yet had any measurable success on the PC desktop, although the open-source OS has been popular with small and midsized businesses that want to run inexpensive Web, file, and print servers. At the same time, more than 600 million desktop PCs are running a Windows desktop version, Connors said. That Linux, or any other desktop OS, will make a viable play in that market any time soon is unlikely.