Microsoft Earnings Up On XboxMicrosoft on Tuesday reported better-than-expected earnings and revenues but the worlds largest software company lowered its guidance for results in its fiscal year ending June 2004. John Connors, chief financial officer, said the company planned to invest aggressively in the government and academic markets, as well as small and medium-sized companies, and reach out to developers. Microsoft also revealed it had amassed $46bn in cash and short-term investments, mostly thanks to strong performances from its Windows operating system, Office productivity suite and server products. The strong quarterly results will come as a relief for technology investors, following a series of profits warnings from other leading software vendors, such as Siebel Systems and PeopleSoft. Six of Microsofts seven divisions posted higher revenues. The exception was the home and entertainment division, which includes the Xbox games console, which has had disappointing sales. Microsoft shares had closed down 0.5 per cent at $24.61 on Tuesday, but in after-hours trading they jumped 4.3 per cent to $25.66. "We feel good about how we ended the quarter. This is a tough environment in both the consumer and enterprise space and we are not expecting a significant improvement next financial year," Mr Connors said in an interview with the Financial Times. The group posted earnings of $2.79bn, or 26 cents a share, compared with $2.73bn, or 25 cents a share. The results would have been better except for a 36 per cent fall in investment income from $739m to $472m because there were no large disposals this year. Revenues rose 8 per cent to $7.84bn, boosted by $200m due to the dollars weakness. Consensus forecasts had been for earnings of 24 cents a share on revenues of $7.75bn. For the current quarter, Microsoft predicted revenue would be between $7.8bn and $7.9bn, while earnings per share would be between 23 cents and 24 cents, in line with expectations. For the year ending June 2004, the group said it should achieve sales of $33.1bn-$33.8bn and earnings per share of $1.04-$1.06. That is lower than consensus forecasts of $1.08 per share on revenues of $34.9bn. Revenues of Microsofts largest business, the client division which includes Windows, rose 10 per cent to $2.53bn. The information worker business, which includes Office, generated sales that rose 9 per cent to $2.3bn.