Microsoft profit up 11 percent in quarter despite Xbox problem

SAN FRANCISCO - Microsoft said Thursday its profit for the past quarter rose 11 percent from a year ago to 3.03 billion dollars, boosted by the new Windows Vista operating system and the new Office software suite.

The world's biggest software company, which closed out its fourth fiscal quarter, said profits were dented by a reserve to repair or replace flawed Xbox gaming consoles, subtracting 749 million dollars from net profit.

Revenues for the three months to June 30 increased 13 percent to 13.37 billion dollars.

The increase was fueled by the introduction earlier this year of Vista, the latest version of the Windows system used on an overwhelming majority of personal computers worldwide, and the 2007 Microsoft Office software package for word processing and other functions.

Excluding special items, the profit amounted to 39 cents per share, in line with Wall Street forecasts.

For the full fiscal year, Microsoft posted a net profit of 14.06 billion dollars on revenues of 51.1 billion.

"Surpassing 50 billion dollars in annual sales is a testament to the innovation and value that our product groups delivered into the marketplace, as well as the outstanding execution by our field sales, marketing teams and partners to bring that value to life with our customers," said Kevin Turner, chief operating officer at Microsoft.

"Our results this quarter cap off an extremely strong fiscal year for the company," said Chris Liddell, chief financial officer.

"We have healthy core businesses and are strategically investing in growth opportunities, which will build on our success and contribute to continued double-digit revenue and earnings growth in fiscal year 2008."

Microsoft's forward guidance was roughly in line with earlier forecasts, including a per-share profit of 38 to 40 cents for the first fiscal quarter.

Microsoft announced earlier in July it expected to spend more than a billion dollars fixing flawed Xbox 360 video game consoles after logging what it called "an unacceptable number of repairs."

Twenty months after the gaming console's launch, the US IT giant conceded that a large number of Xboxes had been returned for repairs stemming from "general hardware failures."

Microsoft has offered to repair or replace problematic Xbox 360 consoles, extend Xbox 360 warranties from one to three years and has offered to reimburse those who bore the cost of fixing the consoles.

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