Microsoft confounded revenue expectations with its second quarter figures, released yesterday.

For the quarter ended 31 December, Microsoft reported revenue of US$16.37 billion, an increase of 30 percent year over year and a number that solidly beat the $15.95 billion that Thomson Financial analysts had estimated. Last year for the same period Microsoft reported $12.54 billion in revenue.

The company attributed its strong performance to sales of core client products such as Windows Vista and Office 2007, as well as Exchange and SharePoint server software.

Analysts had been expecting the company to report a strong quarter even among economic uncertainty and fears that the US economy is entering a recession.

Microsoft's client business, on sales of Windows Vista, was especially strong in the quarter, with $4.34 billion in revenue compared to $2.59 billion a year ago. According to Microsoft, its client business has grown 20 percent on average since Windows Vista was made available nearly a year ago, and the company believes Vista began hitting its stride for adoption in the second quarter. According to Microsoft, it has sold more than 100 million licences for Vista.

Looking ahead to the next quarter, which ends 31 March, Microsoft said it expected revenue in the range of $14.3 billion to $14.6 billion; operating income in the range of $5.6 billion to $5.7 billion; and earnings per share in the range of $0.43 to $0.45.

Chief financial officer Chris Liddell noted that 60 percent of Microsoft's revenue in the second quarter came from outside the US, and said emerging markets are becoming increasingly important to the company's revenue. In the past several years, Microsoft has made significant investments in selling its technology in developing countries such as India, Brazil and China.