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Last Updated: Thursday, 26 October 2006, 22:16 GMT 23:16 UK
Microsoft profits beat estimates
Box of Microsoft software
Microsoft is planning to launch new versions of its top software
Microsoft, the world's largest computer software company, has reported earnings that topped analyst forecasts.

Net profit was $3.48bn (1.8bn), or 35 cents a share, in the three months to 30 September, from $3.14bn a year ago.

Analysts had forecast 31 cents a share and said earnings would have been stronger had there not been delays to Microsoft's new Vista operating system.

The company said that the main driver of growth was strong sales of its server software, such as SQL Server.

Total quarterly sales climbed to $10.8bn, also a rise of 11% from the same period a year earlier.

"My first take is it was impressive on the top line and the bottom line," said Kim Caughey, an analyst at Pitt Capital.

"All things look good at this point. That is the barometer for the other stocks we own," she added.

'Better guidance'

Despite the positive tone to the first part of the fiscal year, Microsoft trimmed its earnings forecast for the current quarter.

The company said it now expected earnings per share of between 22 cents and 24 cents on sales of between $11.8bn and $12.4bn.

Microsoft also gave its full-year earnings targets of $1.43-$1.46 per share on revenue of $50bn-$50.9bn.

While that was broadly in line with market expectations, Microsoft's shares dipped in after-hours electronic trading in New York on the news. That signals the shares will fall when the stock market reopens on Friday.

Mike Binder, a fund manager at Thrivent Financial, said that a main uncertainty for Microsoft was the release of its Vista programme that, due to replace its best-selling Windows product.

Microsoft could not give better guidance for the year "until Vista unfolds", he said.

Microsoft is expected to release its Windows Vista programme before the end of this year, and will also put out an upgrade of its Office product.

Vista is now due to reach business customers in November and consumers in January.

Microsoft had originally aimed to launch Vista in August 2006.

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