New products boosting Microsoft

For 2006-7 as a whole, the software giant reported a $14bn profit on total sales of more than $51.1bn.

Profits in the past three months were hampered by costs stemming from repairs to the Xbox 360 computer games console.

Microsoft said its core businesses were "healthy" and it would continue to invest in growth opportunities.

Innovation

Microsoft acknowledged this month that it is facing a bill of more than $1bn to cover the cost of offering extended warranties to Xbox 360 owners after problems with the console.

"Surpassing $50bn in annual sales is a testament to the innovation and value that our product groups delivered"
Kevin Turner, Microsoft

Excluding these charges, the firm would have made a fourth quarter profit of $3.78bn.

Sales from the division which includes Vista, launched in January, rose 14% to $38.1bn in the past three months.

Total sales rose 13% to $13.3bn over the same period.

Microsoft said it had had an extremely strong year.

"Surpassing $50bn in annual sales is a testament to the innovation and value that our product groups delivered into the marketplace," said chief operating officer Kevin Turner.

In the upcoming year, Microsoft said it expected sales to rise to between $56bn and $57bn.

Microsoft shares rose nearly 2% before it announced its results but fell in after-hours trading amid concerns it had only met market expectations not exceeded them.