Microsoft reported bumper quarterly sales of its Windows Vista operating system and Office software and said anti-piracy efforts were improving results at an above-average rate. "It's clear that this new product cycle is paying off," said Andy Miedler, technology analyst at Edward Jones. "We're impressed that they had enough confidence to follow thorough and raised guidance. They continue seeing the business being healthy for the remainder of the fiscal year."

But Chief Financial Officer Chris Liddell told Reuters in an interview the company was "a little cautious" about second-half sales in North America. "We're probably a little cautious in the back half of the year, but that's made up for in the other parts of the (global) economy," he said. "Even if we shave a few percentage points off, we think the overall level of growth is still very healthy." Net profit in Microsoft's fiscal second quarter rose to $US4.7 billion, or 50 US cents per diluted share, from $US2.6 billion, or 26 US cents per diluted share, in the year-ago period. Revenue rose 30 per cent to $US16.37 billion.

Analysts, on average, had forecast 46 US cents per share on revenue of $US15.94 billion, according to Reuters Estimates. The second-quarter revenue and profit growth rates are exaggerated by results a year before, when Microsoft deferred more than $US1 billion in net income due to delays in releasing Vista and Office 2007, which hit stores in early 2007.

For the fiscal year ending in June, Microsoft lifted its outlook. It now expects earnings per share to range between $US1.85 and $US1.88 per share, up from its previous estimate of $US1.78 to $US1.81. Wall Street, on average, had projected $US1.81. It boosted its revenue outlook to between $US59.9 billion and $US60.5 billion, up from $US58.8 billion to $US59.7 billion before. "I think (the forecast) is pretty strong. Microsoft often sets the bar low for itself ... they are extremely conservative with regard to promising results (but) these numbers tell me that Microsoft is seeing strength in the pipeline," said Kim Caughey, senior analyst at Fort Pitt Capital Group.

Microsoft has long argued its products are less sensitive to swings in technology spending because they account for a small, but essential, portion of overall spending by corporate customers. Caughey said Microsoft's business revenues may be less affected because their biggest business customers are buying site licenses, which are not dependent on how many people are in the building.

"The roll-out of Vista has included another tier of pricing aimed at business so they are going to get more revenue there. It may be for a lower number of seats but it's a higher dollar amount," he said. While Microsoft and other tech companies are sensitive to the economy, Miedler said Microsoft and software in general can be a bit more defensive, in part because the products they sell are designed to improve productivity and help cut costs. Microsoft posted strong Vista sales, helped by double-digit percentage growth rates in computer sales in the quarter. A strong performance for Windows drove Microsoft's first-quarter results, which far exceeded Wall Street's expectations.

For the current quarter, Microsoft said earnings per share would range between 43 US cents and 45 US cents per share on revenue ranging from $US14.3 billion to $US14.6 billion. Analysts, on average, had predicted 44 US cents a share on revenue of $US14.4 billion, according to Reuters Estimates.

Shares of Microsoft surged to their highest levels since 2001 after the September-quarter results. As of Wednesday's close, the stock had fallen more than 10 per cent since then, partly due to economic concerns and broader market declines. But in after-hours trade, Microsoft shares rose to $US34.75, after closing up four per cent in regular Nasdaq trade at $US33.25. Reuters