Microsoft's better-than-expected quarterly results, reported earlier this morning, were driven by the revival of the global PC market and continued cost-cutting. But weak spending by businesses is still rattling some products, and Microsoft still hasn't figured out how to make money online.

Here's a division-by-division breakdown of the results.

Windows & Windows Live: Reported revenue in this division fell to $2.62 billion in the quarter, from $4.28 billion in the same quarter a year ago, but that was due largely to accounting rules that required the company to defer $1.5 billion in revenue to future quarters because of free Windows 7 upgrade offers made to recent buyers of Windows Vista PCs.

Without that deferral, revenue would have been $4.09 billion, down a more modest 4 percent.

The overall result was better than some analysts had been expecting, reflecting recent reports that PC sales are starting to rebound. Microsoft makes most of its money on Windows from copies preinstalled on new PCs. The company said it experienced record sales of Windows licenses for the quarter, without providing specific numbers.

Goldman Sachs analyst Sarah Friar expressed optimism about the Windows business in a note to clients after the earnings release.

"Evidenced by the large deferral reported in the Windows & Windows Live division, we expect Microsoft to post another solid quarter in December, reported in mid-January, providing confidence that the Windows 7 cycle is putting the core divisions back on track post Vista," Friar wrote. "We expect positive feedback on the operating system to come to the fore through the next several months, improving sentiment."

One warning sign: The key measure of OEM Premium Mix fell to 63 percent, down 8 percentage points. That tracks the number of premium Windows editions sold to computer makers, and a lower mix means Microsoft isn't making as much money on each copy of Windows, on average, even if overall unit sales go up. Microsoft cited factors including an increase in sales of lower-cost netbook PCs, and businesses buying fewer premium editions.

Server & Tools: Overall revenue in this division was essentially flat, at $3.4 billion, reflecting the continued reluctance of big companies to spend money on new technologies. Despite that fact, the division was able to boost its profits compared with the same quarter last year as a result of past job cuts and other cost cutting.

Here's how Microsoft explained the cost savings in its quarterly filing with the SEC:

"Sales and marketing expenses decreased $106 million or 11%, primarily due to decreased headcount-related expenses of corporate sales force and outbound marketing spend. Cost of revenue decreased $69 million or 9%, reflecting the decline in demand for consulting services. Research and development expenses decreased $30 million or 6%, primarily driven by decreased vendor and headcount-related expenses. General and administrative expenses decreased $18 million or 18%, due to decreased headcount-related expenses."

Online Services Division: Looks like Microsoft's online business isn't seeing signs of the turnaround that Google reported last week. Revenue was down 6 percent, to $490 million, and the division's loss widened to $480 million, compared with a loss of $321 million in the same quarter last year.

Microsoft blamed declining online advertising revenue -- which fell 3 percent, to $421 million. The company is hoping that its agreement with Yahoo will help matters by giving it the critical mass to compete with Google in the search market. The Microsoft-Yahoo deal is currently undergoing regulatory review.

Should be interesting to see how much patience Microsoft investors have with the continued struggles of this division, particularly if the situation continues as the economy recovers.

Business Division: Pricing promotions and weak business spending hurt this division, which gets more than 90 percent of its revenue from sales of Microsoft Office products. Revenue fell 11 percent, to $4.4 billion, and profits fell by a similar proportion.

Here's how Microsoft explained the trends in its quarterly filing.

"Consumer revenue decreased $390 million or 34%, primarily as a result of pricing promotions in the first quarter of fiscal year 2009 that drove increased licensing in that period, a shift to lower-priced products, and a decline in licensing the 2007 Microsoft Office system. Business revenue decreased $161 million or 4%, primarily reflecting a decline in licensing the 2007 Microsoft Office system to transactional business customers and a 6% decrease in Microsoft Dynamics revenue, offset in part by growth in multi-year volume licensing agreement revenue."

Entertainment & Devices: Overall revenue was essentially flat, just under $1.9 billion, but there's some interesting stuff happening in this division's underlying businesses.

Despite the struggles of the overall industry, revenue from the Xbox 360 and PC video-game business increased by 96 million, or 8 percent, according to the company's quarterly filing -- which attributed the result "mainly to increased revenue from Xbox Live and Xbox 360 video game, offset in part by decreased revenue per console resulting from price reductions during the past 12 months."

Other factors offsetting the rise in video game sales included lower sales of PC hardware products and Zune devices and services, the company said.

The company shipped 2.1 million Xbox 360s for the quarter, down about 100,000 units from the same quarter a year ago.

Even with the flat revenue, the Entertainment & Devices Division was able to boost its operating profit for the quarter to $312 million, from $159 million, by reducing operating expenses. Factors cited there included job cuts over the past year and lower Xbox 360 "platform costs." The company didn't detail those platform costs, but generally the cost of manufacturing a console decreases over its lifetime.

Microsoft shares are up about 5 percent on the day, trading around $28, as of noon Pacific time. See our earlier post for a look at the company's consolidated results.