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Microsoft posts 65 percent rise in earnings

Microsoft Corp. reported a rise in quarterly profit on Thursday, boosted by revenue booked on discounted license upgrades for its new Windows Vista operating system and Office 2007 software.
/ Source: Reuters

Microsoft Corp. posted a 65 percent rise in quarterly profit on Thursday, topping Wall Street estimates due to strong demand for its new Windows Vista operating system.

Shares of Microsoft rose 4 percent after the announcement, in which the world’s biggest software company also forecast 2008 earnings at the midpoint of a range of analysts’ estimates.

“The strength of Vista is really driving this,” said Kim Caughey, analyst at Fort Pitt Capital Group. She added that the company had set “manageable expectations for the full year 2008, which generally allows them some headroom.”

Microsoft posted a net profit of $4.93 billion, or 50 cents per diluted share, in its fiscal third quarter ended March 31 vs. a profit of $2.98 billion, or 29 cents per share, in the year-ago period.

Excluding tax benefits and a legal charge, Microsoft earned 49 cents per share, beating the average analyst forecast of 46 cents, according to Reuters Estimates.

Revenue rose 32 percent to $14.4 billion. Analysts, on average, had forecast revenue of $13.89 billion, with estimates ranging from $13.73 billion to $14.09 billion, according to Reuters Estimates.

Microsoft deferred about $1.7 billion in revenue from its second quarter to its third quarter to account for upgrade coupons given to customers prior to the January launch of Vista and Office 2007.

The company’s 2008 business year, which starts in July, will be the first full year of earnings to benefit from consumers buying new computers loaded with Vista and Office 2007, or companies upgrading computer systems.

Microsoft forecast diluted earnings per share of between $1.68 and $1.72, on revenue of $56.5 billion to $57.5 billion for the coming business year.

Analysts had forecast earnings of $1.69 a share on sales of $56.34 billion, with sales estimates ranging from $55.3 billion to $59.6 billion, according to Reuters Estimates.

For the current quarter, Microsoft said it expects to earn between 37 cents and 39 cents a share on revenue of $13.1 billion to $13.4 billion.

Analysts, on average, were expecting earnings of 41 cents a share and revenue of about $13.31 billion.

Microsoft expects Vista and Office 2007, the latest versions of its two flagship products, to underpin profit growth over the next few years. After several delays, Microsoft released both to consumers in January.

As of the close of trade Thursday, Microsoft stock was down 3 percent since the start of 2007, while the S&P 500 had risen 5 percent in the year to date.