Microsoft beat analysts' predictions for the last financial quarter, posting a record revenue of $17.4bn (£10.8bn), up six percent on a year ago, but Xbox and Windows Phone fell short of expectations.
Microsoft results Q3 2012:
- Xbox and Windows Phone makes $229m loss
- Windows 7 profits up four percent, Office up 14 percent
- Overall revenue up six percent
- Profits down $100m
Profits for the company fell from $5.2bn to $5.1bn compared to the year-ago quarter, but still managed to beat analysts' predictions of $4.93bn profit on revenues of $17.2bn.
Windows and Office performed strongly, but there was a surprising loss from the Entertainment and Devices division, which covers the Xbox 360 games console and Windows Phone smartphone operating system.
The E&D division posted a loss of $229m, down from a profit of $210m in the same quarter last year.
Despite this, the overall results were positive and the markets reacted accordingly, with Microsoft's share price up three percent, adding 90c to finish at $31.91 in extended trading on Thursday - the price is now up 20 percent from this time last year.
"We're driving toward exciting launches across the entire company, while delivering strong financial results," Microsoft chief executive Steve Ballmer said.
The Redmond company still lacks far behind Apple, which now has a market value more than double that of Microsoft - $548bn compared to $260bn - and revenues from iPhone sales alone exceeded Microsoft's overall revenue last quarter.
Windows and Office remain the cash cows for Microsoft and make up 105 percent of the company's profits - which are then diluted by losses in other divisions such as Entertainment and Devices.
Despite Windows 8 not being far away, revenue for the current Windows 7 operating system rose by four percent from the year-ago quarter, up to $4.6bn - particularly good considering Windows PC sales have grown just 1.9 percent in the quarter, according to Gartner analysts.
Profits from Microsoft Office rose by an impressive 14 percent from the same quarter a year ago.
Although still performing poorly and reporting a loss of $479m, Microsoft's Online Services division - which includes the Bing search engine - is up on last year, where losses were $776m in the same quarter.
Revenue for the division, however, was down from the last quarter, coming in at $784m compared to $707m in the previous quarter.
The company did not give sales figures for its Windows Phone mobile operating system, with which Microsoft has a strong partnership with Nokia and its Lumia range of smartphones.
But the phones have sold poorly, which contributed to Nokia posting a loss of £1bn for the last quarter, with smartphone sales down 50 percent.