Microsoft has reported disappointing revenues but forecast that product launches would revive growth, helping revive faith in technology stocks after a poor day for the sector on Thursday.

Microsoft, the world’s biggest software company, reported revenues of $9.62 billion for the first three months of 2005. The figure, 5 per cent higher than a year before, fell below Wall Street forecasts of a $9.8 billion result.

The shortfall reflected a sluggish performance in the Windows division, which is responsible for products including the computer operating system software with which Microsoft made its name, and which reported revenue growth of 2.1 per cent to $2.98 billion.

In the division selling Microsoft Office, sales rose by 2.5 per cent to $2.77 billion.

"Office and Windows pay the bills, so it would be more comforting if those two divisions were showing stronger year-to-year growth," said Joe Wilcox, an analyst with Jupiter Research.

However, the company’s Entertainment unit, backed by the Xbox console, achieved an 11.9 per cent rise to $593 million.

Group net profits surged by 94 per cent to $2.56 billion, equivalent to $0.23 a share, a figure flattered by a fall in legal charges. In the latest quarter, Microsoft paid out $768 million to Gateway, the computer maker, to settle anti-trust claims. A year before, the company swallowed a $2.53 billion charge, reflecting a settlement with Sun Microsystems and a European Commission fine.

Excluding one-off charges, Microsoft’s profits reached $0.32 a share, in line with Wall Street forecasts. Scott Di Valerio, Microsoft’s corporate controller, said: "Despite a mixed enterprise software environment, the quarter played out largely as we expected and operating income and earnings-per-share results were in line with our expectations."

Microsoft pleased analysts by predicting revenues of between $10.1 billion and $10.2 billion for the current quarter, the last in Microsoft’s fiscal year, a range narrowly ahead of forecasts.

For the next fiscal year, the company raised its revenue forecast to between $43.3 billion and $44.1 billion compared with previous guidance of a $39.8 billion to $40 billion range.

Profits would reach between $1.26 and $1.30 a share compared with the $1.09 to $1.11 range previously expected.

The data, which was released after the close of New York markets last night, helped Microsoft shares rise by $0.46 to $24.91 in pre-market trade today.

The stock closed $0.54 lower at $24.45 yesterday amid the share rout following the release of weak US GDP data.

The tech-weighted Nasdaq index shed 26.25 points to close at 1,904.18, a six month low. The Dow Jones Industrial Average lost 128 points to end at 10,070.

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