The company continues to experience growing pains in its online
division, however, posting a larger operating loss in that area as it continues to build the costly infrastructure it believes it needs to compete with Google and Yahoo.
Microsoft overall saw its profits rise 23%, to $4.29 billion. Companywide revenues hit $13.76 billion, up 27 %--the company's highest first-quarter growth rate since 1999. "It took everybody by surprise," says Sid Parakh, analyst at McAdams Wright Ragen.