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Microsoft Posts Higher Profit, Issues Weak Outlook

Microsoftreported a 2 percent rise in quarterly profit, driven by sales of new computer server software, and lowered its full-year earnings forecasts to account for a toughening economy. But the company's shares rose in extended trading as the lowered outlook was less negative than some investors expected.

Microsoft reported earnings of $4.37 billion, or 48 cents a share, on sales of $15.1 billion in its fiscal first quarter, against a profit of $4.29 billion, or 45 cents a share, on sales of $13.762 billion last year.

Analysts surveyed by Thomson Reuters expect profit of 47 cents a share on $14.8 billion in revenue.

Shares of Microsoft rose about 2 percent in extended trading after finishing Thursday's regular session 3.67 percent higher at $22.32.

Microsoft, the world's largest software maker, cashed in on new releases of computer server software such as Windows Server 2008 operating system and database software SQL Server 2008.

Looking ahead, Microsoft said it expects fiscal second-quarter earnings of 51 cents to 53 cents a share, below the current consensus of 55 cents a share.

Microsoft Corporate Headquarters
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Microsoft Corporate Headquarters

It expects sales of $17.3 to $17.8 billion in the period, slightly short of analysts' view of $18 billion.

"Microsoft reported a very solid Q1. What people were expecting was for them to take down guidance and they did. But it was only marginally lower. I think people were expecting much worse," said Toan Tran, an analyst with Morningstar.

"Everyone was worried about the guidance. If you are a Microsoft investor you should be happy that Microsoft thinks they will weather the storm relatively well," Tran added.

For its full 2009 fiscal year, Microsoft foresees earnings in a range of $2 to $2.10 per share, versus the current consensus estimate of $2.11 a share. On the sales side, the software maker now sees revenue of between $64.9 billion and $66.4 billion, versus Street estimates of $66.5 billion.

"We, like most companies, saw a slowdown at the tail end of the quarter in particular," Chief Financial Officer Chris Liddell said in an interview with the Associated Press. "We're now taking a more conservative stance on the balance of the year."

Shares of Microsoft have fallen 19 percent since it last reported earnings on July 17.

The company abandoned its pursuit of Yahooin the quarter, vowing to invest in its own search and advertising operations in order to catch market leader Google. But Microsoft was unable to boost search share in the quarter.

- Wire services contributed to this story.