Microsoft profit up, Windows lag

Microsoft Corp. reported record fourth-quarter revenue Thursday, helped by strong sales of its Office software suite.

But revenue from the division that includes Microsoft’s Windows operating system fell 1 percent from the same time last year, marking the third straight quarter of decline. The drop suggests that consumers are buying fewer computers that use Microsoft’s software. It may also indicate that more consumers are moving to tablet computers, rather than upgrading their existing laptop and desktop computers.

Total revenue for the fiscal fourth quarter rose 8 percent from last year to $17.4 billion, higher than the $17.2 billion that analysts polled by FactSet expected.

Growing Office sales helped revenue from the company’s largest division climb nearly 8 percent to $5.78 billion. Microsoft said its results were also aided by higher software and server sales to businesses and the popularity of its Xbox 360 video game console and Kinect motion-sensing game control device.

However, sales in the company’s Windows and Windows Live division were soft, dipping to $4.74 billion from $4.78 billion. Investors have been focused on this segment of the business amid concern that the increasing popularity of tablets like Apple Inc.’s iPad are cutting into sales of computers that use Microsoft’s ubiquitous software.

Since this unit already declined in the previous two quarters, pressure had intensified on the world’s largest computer software maker to show growth during the three-month period that ended in June-- especially since worldwide PC shipments rose in the range of 2.3 percent to 2.6 percent during the quarter, according to two different reports from research firms IDC and Gartner.

And with Apple’s report earlier this week that iPad sales nearly doubled year over year to 9.25 million, Microsoft may have an even harder time showing that it can compete as the computing world continues to move toward tablets.

The iPad’s success prodded Microsoft to develop an operating system for tablets, but that isn’t expected to hit the market until next year.

Redmond, Wash.-based Microsoft earned $5.87 billion, or 69 cents per share during the quarter, compared with $4.52 billion, or 51 cents per share, a year ago.

Analysts polled by FactSet expected a profit of 59 cents per share.

For the full fiscal year, Microsoft earned $23.2 billion, or $2.69 per share, on $69.94 billion in revenue. This compares with net income of $18.8 billion, or $2.10 per share, on $62.5 billion in revenue a year earlier.

Microsoft shares fell 19 cents to $26.90 in extended trading. The stock finished regular trading up 3 cents at $27.09.