Page last updated at 14:36 GMT, Friday, 18 July 2008 15:36 UK

Microsoft results hit its shares

XBOX 360
This time last year Microsoft took a $1bn charge for its Xbox 360 consoles

Microsoft's quarterly earnings, and the software company's predictions for the next three-month period, have come in worse than many analysts expected.

Net profit was $4.3bn (2.2bn) in April to June. That is 41% higher than a year earlier, when Microsoft took a $1bn charge to fix faulty Xbox 360 consoles.

For the current quarter, it predicted earnings of 47 to 48 cents per share, less than the expected 49 cents.

Microsoft shares tumbled 5.89% to close at $25.86.

Takeover attempts

Microsoft said that its online division, which makes most of its money from online advertising, lost $488m in the quarter.

That figure was almost double its loss for the same period of 2007.

"This is the area where we're seeing direct impact from the economic slowdown," said Microsoft's chief financial officer Chris Liddell.

Microsoft has spent much of this year trying to buy Yahoo and made its latest attempt via a joint offer with the investor Carl Icahn last weekend.

"It's back and forth with Yahoo and Microsoft every day," said Sid Parakh, an analyst at McAdams, Wright, Ragen.

"That's distracting for investors and employees and even advertisers."

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