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Microsoft net income increased 42 per cent to $US4.3 billion from $US3.04 billion a year earlier, the company said in a statement today. Sales also rose 18 per cent to $US15.8 billion in the quarter ended June 30. Analysts were anticipating sales of some $US15.1 billion.

According to Bloomberg.com, the "deepening credit crunch and increase in fuel prices have created what Goldman Sachs says is the worst technology spending environment globally since 2003".

Furthermore, Microsoft CEO Steve Ballmer is seeking to boost sales overseas and efforts have been hampered by piracy in countries such as China, where eight in 10 programs are illegal copies, according to the report.

"The forecast from Microsoft was a little light, reflecting the slowing economy,'' Michael Holland, chairman of Holland & Co., adding that "They also have a major issue with piracy, and it looks like an intractable problem", according to Bloomberg.com.

And the misery fro Microsoft flowed online says Bloomberg as sales of Internet advertising "missed Microsoft's estimates as the business lost Web search queries to Google. The unit's loss widened to $US488 million. Revenue from business applications such as the Office word-processing and spreadsheet programs also trailed company goals".

However in a bright note for the IT industry, PC global sales rose 16 per cent to 71.9 million units worldwide last quarter after price cuts stoked demand, Gartner said yesterday, adding that figure beat the 11 per cent growth the researcher itself had predicted.