Microsoft posts rise in profits, but web ad business rocky

Shares of Microsoft sank more than 5%, a day after the company missed Wall Street's earnings forecast by a penny, and issued softer-than-expected guidance for the current first quarter, an Associated Press report said.

Microsoft cited weakness in the online business, which makes most of its money from web advertising, the report said.

With a Yahoo search deal uncertain at best, Microsoft also plans to invest hundreds of millions of dollars more than expected in the next year to whip its unprofitable online operations into shape, the Associated Press report further said.

Analysts, however, wondered how long Wall Street can wait to see those bets pay off.

Shares dropped €0.88 (US$1.41) in morning trading, to €16.5 (US$26.11).

Microsoft said Thursday its fiscal fourth-quarter profit jumped 42%, or 13%, factoring in a hefty charge a year ago, as revenue topped €9.5 billion (US$15 billion).

For the three months ended June 30, Microsoft's profit jumped 42% to €2.7 billion (US$4.3 billion). In the year-ago quarter, earnings totaled €1.9 billion (US$3 billion), hurt by more than €630 million (US$1 billion) in charges related to defective Xbox game consoles.

Revenue increased 18% to €9.7 billion (US$15.8 billion) from €8.4 billion (US$13.4 billion) last year, just ahead of Wall Street's average forecast of €9.8 billion (US$15.7 billion), according to a Thomson Financial survey. The revenue rise would have been 14% if not for weakness in the dollar.