Double-digit growth for Microsoft and IBM

Despite a sagging economy, tech giants Microsoft msft and IBM ibm on Thursday reported double-digit growth in quarterly revenue and profits.

IBM handily beat most analysts' forecasts and raised its estimates for what it expects to earn this year. But Microsoft's fiscal fourth-quarter profit fell a bit short of Wall Street's expectations. The software giant also posted lower-than-expected guidance about the current summer quarter.

The news, released after markets closed, sent Microsoft shares down 6% in after-hours trading. In regular trading, it had closed at $27.52, up 26 cents.

For the quarter ended June 30, Microsoft's net income rose 42% to $4.3 billion, or 46 cents a share. Analysts polled by Thomson Reuters anticipated 47 cents a share on average. Revenue climbed 18% to $15.8 billion.

For its full fiscal year, Microsoft's net income rose 26% to $17.7 billion, or $1.87 a share. Revenue for the year surged 18% to $60.4 billion.

"Diversification of our businesses positions us well to weather the economic turmoil," said Frank Brod, Microsoft's chief accounting officer.

Double-digit growth in PC sales, and a weak dollar, helped boost sales and profits of its flagship Windows computer operating system. However, the $838 million in revenue contributed by its online services group, which competes with Google, fell short of the company's earlier guidance suggesting it could top $900 million.

Uncertainty surrounding a botched attempt to acquire Yahoo to better compete against Google didn't help. "It was a distraction," says Sid Parakh, tech stocks analyst at McAdams Wright Ragen.

IBM blew past Wall Street estimates by posting net income of $2.8 billion, or $1.98 a share, in the second quarter. That's 16 cents a share higher than the average estimate of analysts polled by Thomson Reuters. Revenue rose almost 13% to $26.8 billion, as IBM's computing and consulting services thrived globally.

Big Blue also raised its profit outlook for 2008 by 25 cents to $8.75 a share; it expects to benefit from its profitable blend of services, software and hardware. "These results demonstrate that IBM has the ability to thrive in both emerging and established markets," CEO Samuel Palmisano said in a statement. "A distinctive business model … gives us a competitive edge in a global economy."

IBM's shares closed at $126.52, up 58 cents, and slipped to $126.12 in after-hours trading.

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