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The company showed Q4 profits of $2.83bn, compared with $3.7bn for 2005.

However in other areas Redmond ploughed ahead: revenues were up 16 per cent year on year to $11.8bn. Analysts had been predicting $11.75bn at best. Operating income amounted to $3.88bn, up 30 per cent.

The results included one time charges for legal expenses that amounted to 3 cents a share. This compares with a 5 cent per share hit in 2005, but also 9 cents a share in tax benefits.

Microsoft had more good news for investors in the form of a share buyback scheme that would

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account for some $40bn of stock.

Half of this will be accomplished through a $20bn tender to be completed on 17 August, which adds up to roughly 8.1 per cent of outstanding shares. Microsoft directors and executives have said they would not participate. The board had additionally approved further share buyback moves up to a further $20bn until June 2011. Microsoft said it had also completed a $30bn buyback scheme.

Redmond highlighted a 35 per cent increase in SQL Server revenues for the quarter and an almost doubling in Windows Mobile licensing, up 90 per cent.

'We delivered a very strong finish to the fiscal year highlighted by customer demand for our recently launched products of Xbox 360, SQL Server 2005, Visual Studio 2005 and Microsoft Dynamics CRM 3.0, which fuelled a combined 30 per cent revenue growth of their business groups for the quarter,' said Chris Lidell, Microsoft's CFO.

The full year, ending 30 June 2006, showed revenues of $44.28bn, up 11 per cent year on year, and net income of $12.6bn, compared with 12.25bn for the prior year.

Microsoft stock was up 4.5 per cent at $23.89 at the time of writing.