The success of the new Halo 3 video game has helped Microsoft post its strongest first quarter results in eight years, with profits soaring by 23 per cent.

Fervent sales Windows and Office for the quarter ended September 30 also helped achieve profits of $4.29 billion, up from $3.48 billion the year before.

It is the sharpest gain in first-quarter sales for Microsoft since 1999.

Halo 3 and the Xbox 360 consoles it is played on, led to profits of $165 million at the company’s entertainment and devices division.

Revenue rose to $1.93 billion, including $330 million from Halo 3, which works out at nearly twice last year’s quarterly sales. It the second time the Xbox division has made a profit.

Microsoft has sold a total of 88 million copies of the Windows Vista operating system since the newest edition went on sale in January. Almost 30 million of these sales have happened since the end of July.

The business unit responsible for Vista contributed $4.14 billion in revenue in the quarter, 25 per cent more than a year ago.

Demand for Vista was encouraging in "emerging markets" such as Russia and China, Microsoft chief financial officer, Chris Liddell, said during a conference call with analysts.

Sales from the unit that makes the Office 2007 software suite rose 20 per cent to $4.11 billion.

The division responsible for online advertising posted a loss of $264 million, largely because of the company’s acquisition of advertising network aQuantive in the quarter, as well as investments in Web search, premium content and data centres.

Colleen Healy, general manager of investor relations for Microsoft said: “This is a competitive space. If you want to play right now, you’re in investment mode.”

With aQuantive included, Microsoft’s online ad revenue grew 33 per cent. Without aQuantive’s $80 million, Microsoft’s ad revenue would have improved 25 per cent.

McAdams Wright Ragen analyst Sid Parakh told Dow Jones: “I think people are going to revisit how they look at Microsoft. So far they’ve been viewing it as value stock. Going forward, they’ll think about it as a growth stock.”

Microsoft raised its guidance for the fiscal year. The company said it expected to earn $1.78 to $1.81 per share on revenue of $58.8 billion to $59.7 billion.

Earlier, the company predicted it would earn $1.69 to $1.73 per share on $56.8 billion to $57.8 billion in sales.

This week, Microsoft said it had invested $240 million Facebook, giving the social networking site an implied value fof $15 billion.

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