That helped propel the Redmond, Wash., software makers revenue for the full fiscal year ending June 30, 2005, to a record $39.79 billion, an 8 percent rise over the $36.84 billion reported last year.
But that is less than the record revenue of $43.3 billion to $44.1 billion that company management was predicting in April for the full fiscal year.
Net income for fiscal year 2005 came in at $12.25 billion, and diluted earnings per share were $1.12, which included legal charges of 13 cents and tax benefits of 9 cents.
That compared with net income and diluted earnings per share of $8.17 billion and 75 cents, which included legal charges of 17 cents and a tax benefit of 2 cents, the previous fiscal year.
In a release after the financial markets had closed in New York on Thursday, Microsoft reported that operating income for the fourth quarter of the fiscal year, to end-June, had fallen slightly to $2.99 billion, which included $756 million in legal charges for antitrust-related claims.
In the same quarter last year, it posted operating income of $3.13 billion.
Net income for the fourth quarter came in at $3.70 billion, and diluted earnings per share were 34 cents, including 5 cents of legal charges and 9 cents of tax benefits.
That compared with net income of $2.69 billion and diluted earnings of 25 cents per share, which included a 2-cent tax benefit, in the fourth quarter of last year.
Chris Liddell, chief financial officer at Microsoft, said the company was heading into the 2006 fiscal year with "solid momentum. Fiscal 2006 is shaping up to be a strong year for growth and investment. We expect double-digit revenue growth next year, kicking off the strongest multi-year product pipeline in the companys history," he said.
While Microsoft continues to invest in the business, it also returned $44 billion to investors through share repurchases and dividends over the fiscal year that just ended, Liddell said.
Giving a breakdown for the fourth quarter to end-June, he said revenue and operating income growth were driven by continued strength in the server and tools business. Strong adoption of Microsofts SQL Server database product had resulted in double-digit revenue growth of 16 percent over the same quarter of the previous year.
"This marks the third consecutive year that the server and tools business has delivered double-digit revenue growth and improved profitability," he said.
All aspects of the Xbox business also reported strong growth, resulting in 22 percent revenue growth for the Home and Entertainment division, Liddell said.
Turning to managements guidance for the full fiscal year ending June 30, 2006, Liddell said revenue is expected to be between $43.7 billion and $44.5 billion, with operating income likely to be in the range of $18.3 billion and $18.8 billion.
Diluted earnings per share were expected to be in the range of $1.27 and $1.32.
For the current quarter ending Sept. 30, 2005, management expected revenue of between $9.7 billion and $9.8 billion, with operating income likely at $4.3 billion to $4.5 billion.
Diluted earnings per share are expected to be in the range of 29 cents to 31 cents.
"All figures include the stock-based compensation expense and assume an effective tax rate of 32 percent," Liddell concluded.