Microsoft Corporation's net income fell 22% in the latest quarter as it deferred revenue from the sale of its upcoming Windows 8 operating system to personal computer makers.

The economic troubles in Europe also weighed on results, which missed Wall Street expectations.

The software company said last night that net income was $4.47 billion, or 53 cents per share, in the fiscal first quarter, which ended on September 30.

That was down from $5.7 billion, or 68 cents per share, a year ago. Analysts were expecting 56 cents per share.

Revenue fell 8% to $16 billion, missing the average analyst estimate of $16.5 billion.

Microsoft's stock initially fell more than 3% in extended trading after the release of the results but recovered to close 1.5% below its price at the close of regular trading.

Executives reassured investors on a conference call, noting that trends in Microsoft's Server and Tools business, which has been the fastest-growing division, were better than they appeared at first glance.

That division makes software for servers and software developers, and is moving from licensing it out programme by programme to striking multi-year licensing deals. That is curbing the growth rate for now but sets the company up for better performance in the future, analysts said.

Analysis of the Windows results were complicated by the deferral of $783m in licence fees for PCs pre-loaded with Windows 8.

Microsoft, which is based in Redmond, Washington, can not count the revenue until the units go on sale on October 26. It also deferred $384m in licence fees from PCs that shipped with Windows 7 but are eligible for a $15 upgrade to Windows 8, and $189m for the PCs that shipped with the new version of Office or are eligible for an upgrade.

Excluding those deferrals and other adjustments, net income was $6.66 billion, or 65 cents per share, down 7% from last year.

Revenue was flat with last year's figure at $17.3 billion. Excluding the deferrals, revenue for the Windows division fell 9% from a year ago, roughly in line with the decline in global PC shipments in the third quarter reported by research firms Gartner and IDC. Consumers held off buying PCs ahead of Windows 8 and probably steered some of their electronics dollars toward tablets and smartphones.

Windows 8 is the most significant revamp since Windows 95 and sports a completely new look that is intended to be consistent across PCs, tablets and smartphones. It is designed from the ground up for touch-sensitive screens, and Microsoft has high hopes that it will keep Windows relevant in a world where tablets are starting to eat into PC sales.

The company is also making its own tablets for the first time, and is set to launch them along with Windows 8.

In its business division, Microsoft's largest, posted a 1% increase in revenue, excluding the deferrals for Office.