MICROSOFT’S quarterly profit fell 32 per cent, but its shares rose 10.52 per cent to close at $20.91 as investors welcomed continuing efforts to cut costs and news that the release of its Windows 7 operating system is on track.

The world’s top software maker offered no profit forecast yesterday, after withdrawing its outlook in January, but did say it expected the personal computer, server and hardware markets to remain weak for at least another quarter.

“While we would all like to think that our recovery will be soon and painless, we unfortunately believe that it will be slow and gradual,” chief financial officer Chris Liddell said on a conference call.

“I didn’t see any improvement at the end of the quarter that gives me encouragement that we are at a bottom and coming out of it,” Mr Liddell added, contesting comments last week from chip-maker Intel that the PC market was over the worst.

Microsoft’s report, following strong earnings from Apple and Google this month, broadly pleased analysts, some of whom braced for worse.

While the company reported a 6 per cent drop in revenue for the March quarter, marking the first year-on-year decline in Microsoft’s history as a public company, it also managed to cut operating expenses by a bigger 9 per cent.

Microsoft, which released the beta test version of the new Windows during the quarter, said it felt good about the testing and the system was on track for a fiscal 2010 launch, which could mean as early as July this year. – (Reuters)