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Microsoft breaks down its earnings

The software giant sees a jump in profits from its server and tools business last quarter, while its desktop Windows and Office business posted slight declines in profits from a year earlier.

Microsoft saw a jump in profits from its server and tools business last quarter, while its desktop Windows and Office business posted slight declines in profits from a year earlier, according to documents filed Thursday with the Securities and Exchange Commission.

The company released individual segment sales when it reported earnings last month but, until Thursday, had not reported how much money each of its seven business units made or lost.

In October, Microsoft reported earnings of $2.6 billion on $8.2 billion in revenue, saying an improvement in PC sales helped the company exceed its earlier forecasts. However, the company also saw a drop in so-called unearned revenue--that is, money taken in for long-term contracts, as customers expressed reticence over security issues.

In Thursday's breakdown, Microsoft said that, for the three months ended Sept. 30, its client business, which is made up of the desktop Windows business, earned $2.26 billion in profits on revenue of $2.81 billion. That compares with a $2.27 billion profit in the same quarter a year ago, on roughly similar revenue of $2.81 billion.

The server and tools unit had a profit of $370 million, up from $297 million a year earlier, as sales grew to $1.87 billion from $1.63 billion a year ago. The information worker segment, which includes the Office business, posted a slight drop in profits, to $1.59 billion from $1.66 billion, despite the fact that sales inched up to $2.29 billion from $2.27 billion a year ago.

The MSN unit turned its first profit, earning $58 million, reversing a $147 million loss in the year-ago quarter. The mobile and embedded device unit roughly halved its loss--to $32 million from $65 million a year ago, while the home and entertainment unit saw its loss widen to $273 million from $245 million a year ago.

The Microsoft Business Solutions unit trimmed its quarterly loss to $79 million, compared with a $94 million loss in the year-ago quarter. The company also had $751 million in losses from corporate and other items, an increase from the $652 million loss posted a year earlier.

Microsoft also reiterated in the filing that it plans to take a charge in its fiscal second quarter as it completes a program in which employees can sell their underwater stock options--that is, options whose exercise price is greater than the level at which Microsoft shares are currently trading--to JP Morgan. Microsoft said it is not currently able to estimate the charge, which relates to the cost of unvested options that are transferred.

The company said it ended the quarter with $51.62 billion in cash and short-term investments, up from $49.05 billion as of June 30.