Microsoft Corp said sales of Windows XP and its Xbox games console boosted net income for its second fiscal quarter, reported yesterday, but profits were knocked back by a $660m accounting charge related to a consumer class action suit.

Redmond, Washington-based Microsoft reported an 18 per cent increase in revenue to $7.7bn for the period to 31 December, but saw net income drop 12.9 per cent to $2.28bn which included the accounting charge. Earnings per share on a diluted basis were $0.41, down from $0.47.

The company claimed it had met its goal of shipping 1.5m Xbox units between the time of its introduction and the end of the holiday season. Revenue from consumer software, services and devices - which also includes the latest version of MSN - were $1.19bn - up from $506m.

Despite growth, company chief financial officer John Connors sounded a note of caution. Connors said Microsoft is concerned about the health of the global economy and has yet to see a recovery in many of the world's largest markets.

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