Revenues rose 5% to £13.47 billion, slightly down on some analysts’ expectations.

Revenue at the Windows operating system division fell, but rose at its server, Xbox 360 and online services arms.

Wall Street welcomed the figures, with Microsoft’s shares rising 2.1% in after-hours trading.

Tighter cost control and a continuing reduction of losses at the Bing search engine helped boost the figures.

Analysts were expecting a fall in business at the Windows division due to slower sales of PCs.

The computer industry is facing a worldwide shortage of hard disk drives due to flood devastation in Thailand whit hit the global supply chain of suppliers in November.

But Windows is also facing competition from the growth of tablet computers such as Apple’s iPad and mobile devices using Google’s Android system.

However, Microsoft is hitting back with the release of Windows 8, an operating system for PCs and mobile devices.

Microsoft chief executive Steve Ballmer said in a statement: “We delivered solid financial results, even as we prepare for a launch year that will accelerate many of our key products and services.”

During the quarter the Windows and Windows Live division posted revenue of £3.05 billion, a 6% fall on the previous year.

The Entertainment & Devices division saw the sharpest revenue rise, up 15% to £2.78 billion.

Yahoo came third with about 130 million visitors each month.

But analysts warned Yahoo’s tally might be at risk if young people continued to turn away from web-based email.

The study is based on data collected between January and October and included visits from home and work computers. It involved a sample from a global panel of 200,000 people.

Website                                  Unique visitors per month
1. Google                                        153,441,000
2. Facebook                                     137,644,000
3. Yahoo                                         130,121,000
4. MSN/WindowsLive/Bing                 115,890,000
5. YouTube                                     106,692,000
6. Microsoft                                      83,691,000
7. AOL Media Network                        74,633,000
8. Wikipedia                                      62,097,000
9. Apple                                           61,608,000
10. Ask Search Network                     60,552,000

Source: Nielsen

Although Google trumped Facebook as the most popular web brand, the search giant’s Google+ network came far behind Mark Zuckerberg’s site in Nielsen’s ranking of the most popular social networks and blogs.

Google+ came eighth in the list with 8.02m unique monthly visitors.

That also put it behind Google’s weblog publishing tool Blogger, as well as Twitter, Wordspace, Myspace, Linkedin and Tumblr.

Google’s YouTube was identified as the most popular destination for online videos, attracting more than three times the number of monthly visitors as the music video service Vevo.

While Yahoo maintained its position as one of the top three web brands, an earlier study cast doubt over its ability to retain the position over coming years as it’s email system faces a declining market share.

In the U.S., meanwhile, Chrome is still number three with 17.3%, a 6.41% jump compared to last November. Internet Explorer held the top spot with 50.66% and grew by 0.42%. Firefox was second with 20.09%.

Internet Explorer’s commanding lead has been challenged by the browser’s near absence from smartphones and tablets.

Last month, another researcher, Netmarketshare, reported that Internet Explorer’s share dipped below 50% for the first time.

Safari, Apple’s default browser on the iPhone and the iPad, claimed 62.17% of mobile traffic. Internet Explorer, meanwhile, had 52.63% of desktop traffic, according to the researcher.

Chrome may be coming to Google’s mobile Android platform soon, according to reports. The 3-year-old browser’s growth, which benefits from being promoted on Google.com, hit 200 million users in October.

Chrome also became the most popular browser for accessing Mashable in August.

Microsoft is investigating and says a small percentage of users are affected.

“We take the security of the Xbox Live service seriously and work to improve it against evolving threats,” a Microsoft spokesman said.

“Very occasionally, though, we are contacted by members regarding alleged unauthorized access to their accounts by outside individuals.”

The spokesman continued: “We can confirm that only a small percentage of Xbox Live customers have been affected here in the UK. We highly recommend all Xbox Live users follow our account security guidance in order to protect their account details.”

“We work closely with impacted members directly to resolve any unauthorized changes to their accounts and, as always, highly recommend all Xbox Live users follow our account security guidance in order to protect their account details.”

Microsoft confirmed there had been no breach in the security of Xbox Live itself.

The company says there is advice on its website about staying safe online but advises that people should never give out passwords or email addresses.

It says users should never type personal information into websites unless they are sure that they are genuine.

Visits to video sharing websites by UK users have gone up by more than a third in the last year.

The figures, from internet research company Experian Hitwise, show YouTube accounts for nearly 70% of all video website hits.

It’s now the third most popular site in the UK after Google and Facebook.

Lady Gaga was the most in demand for artist within music searches.

The research was gathered between September 2010 and September 2011.

During that time 240 million hours every month were spent by British internet users watching videos online.

UK’s top 10 websites:

Google UK
Facebook
YouTube
eBay UK
Windows Live Mail
MSN UK
Google.com
BBC News
BBC Homepage
Yahoo! UK & Ireland

Research by Experian Hitwise

Illustrating its dominance in this area, Google owned YouTube, clocked up 184 million of those hours.

That number is still dwarfed by the amount of time spent on social networking sites though.

The same research shows 800 million hours were spent each month on sites like Facebook and Twitter by the UK’s internet users.

Despite YouTube’s dominance of video sharing websites there was also strong growth for other ones too.

BBC iPlayer, the second most popular video site, experienced a 22% rise in traffic last year.

That means the number of visits to the site has doubled in the last three years.

Under the terms of the agreement, Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will assume the title of president of that division.

Skype was founded in 2003 by Niklas Zennström and Janus Friis.

It was bought by eBay in 2005, but eBay couldn’t find a way to integrate it into its business and subsequently sold it to an investment group led by Silver Lake in 2009.

The deal with Microsoft is a very profitable exit for that group of investors, which includes Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board- as they paid £1.71 billion for Skype.

As for the future of Skype and the challenges Microsoft faces, the first and foremost will be the fact that Skype is not yet profitable. However, Skype’s huge user base (more than 663 million users, 170 million of which use the service monthly) and constant growth make it an appealing purchase for a company that knows what to do with it.

“Together, we will be able to accelerate Skype’s goal to reach 1 billion users daily,” said Bates in a statement.

You can watch the video at:

It found that Internet Explorer users scored lower than average IQ, while Chrome, Firefox and Safari users were very slightly above average.

Camino, Opera and Internet Explorer with Chrome Frame were scored “exceptionally” high.

“The study showed a substantial relationship between an individual’s cognitive ability and their choice of web browser,” AptiQuant concluded.

“From the test results, it is a clear indication that individuals on the lower side of the IQ scale tend to resist a change/upgrade of their browsers.”

Some people have suggested that there may be other factors at work.

Since IE is the default browser for Windows PC users, anyone who doesn’t know how to download and install a new browser will be stuck with it – “which drags down the average”.

And users of other browsers “include a disproportionate number of computer geeks”, which might bring their average up.

Or, they admit, it might be that “IE users really are kind of dumb.”

Within the group of IE users, version 6 users score lowest, while users of version 8 do rather better.

The overall chart shows that Firefox has the smallest percentage of low-IQ users, and the largest of average or high-IQ users. A similar study five years ago found that users had broadly similar IQs.

But if you ever want to argue that Internet Explorer 6 users are too stupid to upgrade, at least now you’ve got some empirical evidence.

Net income at the world’s biggest software maker jumped 23% to 23.15bn for the year.

The figures, which beat forecasts, showed final quarter revenues reached a record high of £10.85 billion, leading to profits of £3.73 billion,  boosted chiefly by sales of Office, Xbox and server software behind Microsoft’s push into cloud computing.

Microsoft’s business division, which sells the Office suite of programs, including Outlook, SharePoint and Excel, was the company’s biggest seller in the quarter, increasing sales by 7% to £3.65 billion.

The company’s online services unit, which runs the Bing search engine and MSN internet portal, increased sales by 16.5% to £ 413 milion, but saw losses increase to £455 million as it struggles to fight competitor Google.

One weaker spot was sales of its widely-used Windows product, which are slowing as tablet PC sales eat into demand for traditional PCs.

Microsoft is itself expected to enter the tablet market next year with the launch of its next operating system, code-named Windows 8, which will be compatible with the low-power chips commonly used by tablet and mobile phone makers.

Microsoft’s share price (MSFT) at around $27 is still some way off it’s record of $37.06 which was posted on 29 October 2007.

The sale of the patent portfolio started as a five way scrap and boiled down to  two separate combined consortia and individual firms including Google and Intel.

Initial estimates suggested the portfolio would attract around £1.24 billion but the four days of intense bidding saw the total rise sharply.

As the bids got bigger some firms dropped out and others became partners to pool their resources. From going it alone, Apple joined a consortium that included Microsoft, Research In Motion and Sony.

Ultimately the portfolio was being fought over by two groups: Google and Intel on one side and the Microsoft/Apple-led consortium on the other.

Google’s bids for a pool of wireless patents were based on unusual mathematical theorems. During the sale, Google’s bids were based on pi, other constants and the distance between the Earth and the Sun.

“Google was bidding with numbers that were not even numbers,” a source involved in the auction told the Reuters news agency.

During its bids, Google picked numbers including Brun’s constant and Meissel-Mertens constant that were said to have “puzzled” others involved in the auction. When bids from rivals hit $3bn, Google reportedly bid pi, $3.14159bn, to up the ante.

“Either they were supremely confident or they were bored,” Reuters’ source said.

It is not clear what inspired Google to draw on obscure mathematics for its bids. However, Google co-founder Sergey Brin is widely acknowledged to be a maths prodigy and the bids may reveal his influence.

Currently Google had about 700 patents in its mobile portfolio, many of which relate to using handsets to serve its core competences such as search.

By contrast, he said, the Nortel patents relate to future technologies that will make mobile networks faster and handsets more powerful.

Owning the patents could also ease the burden on firms making Android devices as they would have fewer licence fees to pay.

Use of Android technology from Google is free provided handset makers pipe traffic back to the search giant so it can make money with adverts.

However, the numbers of companies asking for cash to use the non-Google developed technologies found in Android phones was rising, he said.

For instance, Microsoft has announced licensing deals with many Android phone makers including General Dynamics and HTC.

With the control of the patents passing to a consortium that includes firms that are Google’s bitter rivals in the mobile phone world, licence fees could increase.

The deal is the largest in Microsoft’s 36 year history and also represents a remarkable return for the group of investors who acquired Skype from eBay in 2009 in a deal that then valued the company at £1.83 billion.

The price for Skype, which lost £4.37 million last year and had revenues of £535 million, has raised eyebrows in Silicon Valley but also underlines the pressure Steve Ballmer, Microsoft’s chief executive, is under to secure a bigger share of online and mobile advertising revenues.

Mr Ballmer, who took over from Microsoft co-founder Bill Gates, is grappling with a market in which more advertising revenues are moving online but, critically for Microsoft, more basic computing services are too.

Microsoft said that Skype, which 170m people used last year to hold video conversations online, will be integrated into a variety of its products including XBox, its video game console, and Outlook, its email product.

Analysts said that Microsoft is also likely to integrate Skype into part of its next Windows 8 operating system, which is planned for release next year.

Mr Ballmer said he made the offer to Skype last month because the company “was on a path to [flotation] and I thought we’d be better off if we owned it… The number of Skype users is rapidly accelerating, which was really exciting to me.”

Microsoft is not the first corporate behemoth to try to ride the popularity of Skype, which, apart from 8m customers who pay to make cheap non-video calls, is a free service.

In 2006 eBay stumped up a then incredible £1.7 billion in the hope that its users would use the video service to help negotiate deals.

Three years later the auction site cut its losses, selling Skype to a group of investors including Silver Lake Partners, a private equity firm- who are the current beneficiaries. Although eBay kept a 30% shareholding.

Tony Bates, the British chief executive of Skype who was hired from Cisco only last October, said that the company will focus on generating revenue from video advertising as well as exploiting the growing use of video on mobile.