MICROSOFT RELEASED fiscal fourth quarter financial numbers Thursday that fell short of analysts' expectations, so its stock took a beating.

The PC software behemoth posted revenues for the three months ended June 30 of $15.8 billion, an 18 per cent increase from the prior year's quarter and just above share analysts' forecast of $15.7 billion. Its revenues would have increased by only 14 per cent but for the impact of the weak US dollar, due to its overseas sales volume.

The company said its quarterly earnings rose to $4.3 billion, up 13 per cent from the same quarter last year, excluding a $1 billion charge related to defective Xbox consoles that was incurred in last year's fiscal fourth quarter. With that prior year quarter's charge included, its revenues increased 42 per cent year over year. Its earnings per share was 46 cents for the quarter, just a penny shy of analysts' average estimate of 47 cents.

Microsoft blamed weakness in its online advertising revenues for failing to reach analysts' earnings expectations and issued guidance for its performance expectations in the current quarter that was more cautious than had been earlier anticipated by Wall Street analysts.

Probably due to the inertia of its software preload contracts with the largest PC OEMs, the divisions that sell Microsoft's server software lines, Windows operating system and Office productivity applications increased revenues by 18 per cent to an aggregate $7.9 billion.

The company's software revenues were helped by continued strong PC hardware demand during the quarter. It claimed to have sold more than 40 million Windows Vista licences in the quarter to exceed 180 million total Vista sales since it was released in January 2007.

Microsoft's gaming division, which markets the Xbox, lost money in the quarter but was slightly profitable for the fiscal year overall, likely due to relatively strong Christmas sales last year.

The company's online business lost $488 million in the quarter, more than twice the amount it lost in the same quarter last year.

Microsoft's investors – perhaps demoralised by the perceived failure of Vista, dismayed by the seeming lack of coherent strategy or successful execution in Microsoft's online business, and apprehensive about the potential cost and distraction of its ongoing pursuit of Yahoo – responded to the company's release of its quarterly results by beating down its share price.

The Vole's shares dropped down $1.65 to $25.87 in after-hours trading, a six per cent haircut. µ