Microsoft's Entertainment division revenues up 68%

Revenues from Microsoft's Entertainment and Devices division grew 68%, as company-wide income dropped 11%

Microsoft has reported third-quarter diluted earnings per share of USD 0.47 and operating income of USD 4.41 billion, down 11 per cent from a year ago, on revenue of USD 14.45 billion.

Operating income and earnings per share results included a charge of USD 1.42 billion, or USD 0.15 per share, as a result of a fine from the European Commission.

The company said that sales of Windows for PCs declined 24 per cent and that revenue from its online advertising unit came in at the low end of projections.

Revenue from the Entertainment and Devices division, however, grew 68 per cent over the comparable period last year which Microsoft attributes to demand for Xbox 360 consoles.

Cumulative Xbox 360 console sales surpassed 19 million during the quarter, up 74 per cent from the prior year.

For the fourth-quarter, Microsoft said diluted earnings per share will be in the range of USD 0.45 - 0.48 cents on sales of USD 15.5 - 15.8 billion which falls in line with analyst estimates.

"Our third-quarter results demonstrate the benefit of our diversified business model," said CFO Chris Liddell.

"Our broad span across geographies, product categories and customer segments is a tremendous asset and supports our outlook for double-digit revenue, operating income and earnings per share growth for this fiscal year and also for fiscal year 2009."

Reuters notes that Microsoft has dropped 3.5 per cent in NASDAQ trading since the company offered to buy Yahoo for USD 44.6 billion in January.

"They need to quit fooling around and get the deal done,'' Ken Smith, director of technology investment at Munder Capital Management, told Reuters. "The fundamentals of Microsoft's business are tremendous, but this has really capped the stock.''

This weekend marks the deadline for Yahoo to wrap up a buyout agreement or risk a proxy fight.

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