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The Associated Press

REDMOND, Wash. — (Nasdaq: MSFT) said Thursday that its net income in the most recent quarter rose 35 percent, helped by strong sales of Windows 7.

Microsoft, which maintains a large operation in Charlotte, N.C., is the latest company to benefit from what seems to be a rebound in business spending on technology after the economic downturn. It makes most of its money selling the Windows computer operating system, Office programs and other business software. The company said Windows 7, its newest version, now runs on 10 percent of PCs.

Still, investors sent shares down more than 4 percent in after-hours trading Thursday.


For the January-March fiscal third quarter, Microsoft earned $4 billion, or 45 cents per share. That’s higher than the 42 cents per share forecast by analysts surveyed by Thomson Reuters. It’s up from $3 billion, or 33 cents per share, a year ago.

Revenue rose 6 percent to $14.5 billion, slightly more than the $14.4 billion analysts were expecting. Microsoft had $13.6 billion in revenue in the same quarter a year ago.

Microsoft is waiting to report $305 million in Office revenue until after the upcoming Office 2010 launches in the current quarter.

Microsoft’s online business, which includes Web search and online advertising, deepened its loss to $713 million in the quarter from $411 million a year ago.

Microsoft has started making payments to Yahoo Inc. as part of a Web search deal that the two forged last year. This quarter, the payments amounted to $78 million. But Microsoft is not operating the technology behind Yahoo’s search right away, so it isn’t benefiting from the partnership yet.

Standard and Poor’s said Apple Inc. surpassed Microsoft in market value Thursday to become the second-largest company listed on the S&P 500 index, after Exxon Mobil Corp. The S&P values companies based on the number of shares available for public trading, so it only counts 87 percent of Microsoft’s value. On a total market basis, Microsoft is still bigger than Apple.

Shares of the company fell $1.33, or 4.2 percent, in extended trading Thursday. Before results were released, it closed up 6 cents at $31.39.