Xbox fans helped propelled Microsoft's business during its latest quarter as the repercussions of last year's Windows Vista launch continued to be felt.

For the three months to March 31, Microsoft reported a 10.9 per cent drop in net income to $4.3bn, factoring in the EU's anti-trust fine of $1.42bn, on revenue that grew less than one percentage point to $14.45bn. Earnings per diluted share also fell three cents thanks to the EU penalty, hitting $0.47

The company on Thursday announced a 67 per cent increase in sales of Xbox 360s, producing $1.6bn revenue for its entertainment and devices division.

That compared to the PC client business which increased revenue by 16 per cent, server and tools by 18 per cent, and the business division that declined by nine per cent. Revenue from Microsoft's online services greweight per cent.

In a conference call chief financial officer Chris Liddell hailed the strength of Microsoft's diversified portfolio. He also said the company had no intention of increasing its unsolicited offer for Yahoo!. But the company said that the sales bump from Windows Vista in the same quarter last year made comparisons hard.

Also, it emerged that OEM license revenue was down 24 per cent to $4bn, as PC manufacturers appear overstocked on Windows-Vista machines or are wary of buying new licenses, given the cool public reception to Windows Vista and uncertainty created by Microsoft's will-they-won't extension to Windows XP.

Microsoft claimed 140 million licenses of Windows Vista sold.

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