Xbox boosts Microsoft's bottom-line

Microsoft reported first-quarter profits on Thursday that edged ahead of the company's forecast.

The software giant announced profits of $3.48bn, or 35 cents per share, on revenue of $10.81bn, for the three months ended 30 September. That compares with profits of $3.14bn, or 29 cents per share, on revenue of $9.74bn for the same quarter a year ago. The year-ago profits figure included legal expenses that amounted to 2 cents per share.

Microsoft said in June to expect revenue in the range of $10.6bn and $10.8bn, with per-share profits between 30 cents and 32 cents.

Chief financial officer Chris Liddell said in a statement: "The solid revenue results for the quarter were at the top end of our expectations."

For the current quarter, Microsoft said to expect revenue of $11.8bn to $12.4bn and per-share profits of 22 cents to 24 cents. The outlook is affected by the fact that Microsoft expects to defer $1.5bn in revenue to account for a coupon programme in which buyers of Office and Windows this holiday season will be able to upgrade at reduced cost to Office 2007 and Windows Vista when those products are released early next year. Microsoft said the revenue deferral will affect profits in the quarter by about 11 cents per share.

Microsoft slightly tweaked its financial outlook for the full year, which runs through June 2007.

The company said it now expects revenue in the range of $50bn to $50.9bn and per-share profits in the range of $1.43 to $1.46. In July, Microsoft had said to expect revenue between $49.7bn and $50.7bn and diluted profits per share between $1.43 and $1.47. That included a boost in spending as the company invests in both the launch of Vista and Office 2007, as well as in its online and other emerging businesses.

Microsoft said profits and sales were boosted by strong responses to the products it has launched in recent months, including the Xbox 360 and SQL Server.

Redmond shares dipped slightly in after-hours trading following the profits release. Shares were trading at $28.28, down 7 cents, or less than one per cent, after inching up 4 cents during regular trading on Thursday. In mid-June, shares were around $21.50.

Ina Fried writes for CNET News.com