Microsoft profit falls 24% over Xbox spending

MICROSOFT Corp, the world’s largest software maker, said fourth-quarter profit fell 24% after the company spent more on its Xbox video-game console.

The company announced it was to buy back $40 billion (€31.66bn) in stock.

Net income fell to $2.83bn (€2.24bn), or 28 cents a share, from $3.7bn (€2.92bn), or 34 cents, a year earlier, the Redmond, Washington-based company said.

Excluding legal charges, profit was 31 cents.

Sales rose 16% to $11.8bn (€9.34bn).

Microsoft accelerated investments to get more Xbox consoles to market and catch up to Google Inc in software programs that run over the web. Chief executive Steve Ballmer’s plans to continue that spending this fiscal year sent the company’s shares down 14% during the quarter.

Microsoft shares this quarter had their worst performance since 2002.

Microsoft said profit for the year that began July 1 will be $1.43 to $1.47, up from an April forecast of $1.36 to $1.41. Sales will be $49.7bn-$50.7bn. The company had forecast sales of $49.5bn-$50.5bn. Analysts surveyed by Thomson Financial expect profit of $1.40 on sales of $49.8bn.

Mr Ballmer wants to remake Microsoft around web services tied to the flagship Windows and Office products to compete with Google.

He is also shipping more Xbox machines to take advantage of a delay in Sony’s next PlayStation.

The spending coincides with delays in Office 2007 and the Windows Vista operating system. Revenue from older versions of both products has been growing less than 10% for the past two years as customers hold off purchases.

Microsoft was this month fined 280m by EU antitrust regulators for flouting an order to license Windows information to rivals.

Sales in the quarter were boosted by the increased supply of Xbox consoles and a new version of the SQL database server released last November.