Microsoft posted a 7 per cent gain in profit after tax for the fourth quarter as demand for its Office software and improved results from its online arm more than compensated for a $1.1 billion (€795 million) charge to repair Xbox video game consoles.

Microsoft also raised full-year earnings and revenue forecasts for the current period, citing demand for new software products like its Windows Server 2008.

The company said net profit was $3.04 billion in its fourth quarter to the end of June, up from $2.83 billion a year earlier. Sales rose 13 per cent to $13.4 billion.

Microsoft said it estimated the personal computer (PC) market to have grown by between 11 per cent and 13 per cent in the past three months. It forecast PC market growth of 9 per cent to 11 per cent this year, with Windows sales expected to move in line.

"Many of the same factors that helped us to be successful in 2007, such as a healthy PC hardware market and customer acceptance of our new versions of Office and Windows. . . will help propel us in 2008," said Microsoft chief financial officer Chris Liddell.

For the current quarter, Microsoft sees diluted earnings per share of between 38 and 40 US, based on a revenue range of $12.4 billion to $12.6 billion. It raised revenue guidance for the year by $300 million to a range of $56.8 billion to $57.8 billion.

The world's largest software maker had warned earlier this month that it would incur a charge of up to $1.15 billion in the quarter ended in June to fix an "unacceptable" number of Xbox 360s and to offer a new, extended warranty to customers.

Microsoft said it still aims for its entertainment and devices division to turn profitable in fiscal 2008, with a boost expected from the September release of Halo 3, the latest instalment of one of the best-selling game franchises.

Microsoft's Irish operations employ over 1,200 staff directly and another 500 through third- party contractors. - (Reuters)