Deferred sales hit Microsoft profits

Microsoft has announced a big drop in net profits for the second quarter ending 31 December.

The drop, said the firm, was mainly down to $1.64bn (£863m) in sales from the second quarter being deferred to the third quarter.

This deferral amount has been set aside to cover the cost of replacing recent customers’ Windows XP and Office software with the impending Vista and Office 2007 products.

Last October, the company said purchasers of XP and Office software from the end of October would be entitled to free upgrades to the newer products, once they became available.

Overall group sales were up 6% to $12.54bn (£6.6bn), but the deferral to the third quarter meant that net profits slumped 28% to $2.63bn.

Both new products will be available from the end of this month. Recent buyers of XP can get a free upgrade to Vista up until this spring.

Vista service pack 1 already on the board

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