Software giant Microsoft has reported annual sales of more than $50bn for the first time on the back of strong demand for new products such as Windows Vista.

The supplier says sales rose 15 per cent to $51bn (£25bn), while profits have also increased, up from $12bn (£5.8bn) to $14bn (£6.8bn).

The strong results have come despite costs stemming from repairs to its Xbox 360 computer console. Microsoft is facing a bill of more than $1bn (£487m) to cover the cost of offering extended warranties to console owners.

Sales were driven primarily by consumer purchases of new flagship products Windows Vista and Microsoft Office 2007, says chief operating officer Kevin Turner.

‘Surpassing $50bn in annual sales is a testament to the innovation and value that our product groups delivered into the marketplace,’ he said.

‘In 2008, we will continue to drive growth through new product offerings, such as Windows Server 2008, Visual Studio 2008, SQL Server 2008, Microsoft Dynamics Live CRM and Office PerformancePoint Server 2007.’

Sales for the fourth quarter increased 13 per cent to $13.4bn (£6.5bn) while profits were up 11 per cent to $3bn (£1.5bn).

Microsoft expects to generate $12.6bn (£6.1bn) next quarter and $57.8bn (£28.2) for the next year.

Microsoft is performing strongly in its three main areas, including the client group, business division and server division, says Ovum analyst David Bradshaw.

‘Severs and tools revenue has risen by 16 per cent and considering that many of its products are due for new versions, while the new version of Windows Server is well overdue, this is an extremely good performance,’ he said.

Microsoft’s business division has also raised revenues 13 per cent to $16.4bn (£8bn) but the hidden gem is the Dynamics business.

‘The Dynamics business is doing extremely well and cannot be far off $1bn (£487m) in revenue on its own account,’ said Bradshaw.

‘The challenge to Microsoft will come in maintaining this kind of performance as it and its partners adopt software-as-a-service as a delivery model for an increasingly wide range of products and services.’