[R]5:00PM New York – Microsoft reported earnings increase on higher sales.[/R]

Microsoft Corp (MSFT: chart) reported second quarter revenue of $16.37 billion, a rise of 30% from a year ago, operating earnings of $6.48 billion, increase of 87%, earnings per share of 50 cents, growth of 92%.

Microsoft stock in the afterhours rallied to $34.50, increase of $1.25. In the regular hours of trading at the close of market Microsoft closed up $1.32 to $33.25.

Results in the prior year were impacted by the deferral of $1.64 billion of revenue and operating income and $0.11 of diluted earnings per share from the second to the third quarter of fiscal 2007, due primarily to technology guarantee programs.

Without these deferrals, second quarter growth rates for revenue, operating income and earnings per share would be 15%, 27% and 32%, respectively.

Widows Vista lifted Client group sales by 20% from a year ago and sales of Vista operating software reached 100 million licensee.

Sales to business customers remained brisk in the quarter with Microsoft Business Division and the Server and Tools business each experiencing double-digit revenue growth rates over the prior year and together increased revenue over $1 billion versus the comparable quarter last year.

Microsoft Client division sales rose 75% to $4.34 billion compared to $2.59 billion in the prior year. Sales at server and tools business rose 14% to $3.2 billion, online services division sales increased 22% to $863 million, business division sales edged higher by 37% to $4.8 billion, and entertainment and devices division increased 2% to $3.06 billion.

Entertainment and devices division turned profitable with a operating income of $357 million from a loss of $302 million in the prior year.

Net income in the quarter increased to $4.7 billion from $2.6 billion a year ago and earnings per share rose to 50 cents from 26 cents a year ago.