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Microsoft earnings increase 65 percent

Sales of new versions of Windows and Office exceeded expectations.

SEATTLE - Microsoft Corp.'s fiscal third-quarter profit jumped 65 percent, buoyed by sales of its new versions of Windows and Office.

Earnings for the quarter ended March 31 rose to $4.93 billion, or 50 cents a share, from $2.98 billion, or 29 cents a share, in same period last year.

Analysts surveyed by Thomson Financial had forecast a profit of 46 cents a share.

Revenue for the quarter rose 32 percent to $14.4 billion. Wall Street was looking for $13.89 billion in sales.

Microsoft started selling its newest operating system, Windows Vista, to consumers at the end of January. Its "client" division, responsible for Windows, brought in $5.27 billion in sales, 67 percent more than a year ago.

Analysts estimate that Microsoft deferred $1 billion to $1.5 billion in Windows Vista revenue to the third quarter, to account for upgrade coupons given to PC buyers during the holiday season, before the consumer launch of the new operating system.

Microsoft chief financial officer Chris Liddell attributed the "excellent quarter" to better-than-expected sales of Vista and Office.

Liddell said Vista beat internal forecasts by $300 million to $400 million, and Office 2007 sales were $200 million better than expected.

The client-division sales "are surprisingly ahead of where we thought they would come in," said Sid Parakh, an analyst at McAdams Wright Ragen. "They might indicate Vista is doing fine."

Shares of Microsoft jumped $1.05, or 3.6 percent, to $30.15 at one point in after-hours electronic trading yesterday, after adding 11 cents to close at $29.10 on the Nasdaq Stock Market.