EARNINGS - Microsoft shoots its way to a record with 'Halo 3'

It can take a lot of time to master video games: Microsoft Corp. needed seven years.

The world's biggest software company on Thursday reported its largest-ever quarterly profit for its division that makes the Xbox console and such games as the smash hit "Halo 3." Strong demand for "Halo" put Microsoft's entertainment division into the black with a $165-million profit, reversing a year-earlier loss of $142 million.

The turnabout put an exclamation point on a blowout quarter companywide, one that far surpassed Microsoft's earlier estimates and sent its shares soaring 11% in after-hours trading to $35.52, the highest since 2001. They had risen 74 cents, or 2.4%, to $31.99 in regular trading.

"In 24 hours, they added $38 billion in market capitalization," said Sanford C. Bernstein analyst Charles Di Bona. "That's a pretty good day's work."

The stock surge contributed to a banner week for Redmond, Wash.-based Microsoft. On Wednesday, it nosed out rival Google Inc. to expand an advertising partnership with Facebook Inc. and invest $240 million in the social networking company for a 1.6% stake.

Overall, Microsoft reported a 23% jump in profit to $4.3 billion, or 45 cents a share, for its fiscal first quarter, which ended Sept. 30, from $3.5 billion, or 35 cents, a year earlier. Revenue jumped 27% to $13.8 billion, propelled by strong sales of the Windows Vista operating system. The company raised its full-year revenue and profit forecasts.

"This fiscal year is off to an outstanding start with the fastest revenue growth of any first quarter since 1999," Chief Financial Officer Chris Liddell said.

Although Vista hasn't commanded the same attention in the U.S. as some previous versions of Windows, the much greater number of computers in the world today dictates much larger software sales.

"Even if it's not a heroic product, the numbers are going to be bigger," Di Bona said.

The gaming division's profit was dwarfed by those units that sell Windows and Office, which reported profit of $3.2 billion and $2.7 billion, respectively. And the results driven by "Halo" were a small repayment on Microsoft's investment of more than $6 billion in games since it worked to launch the Xbox console in 2001.

Microsoft's game division last earned a profit almost three years ago, when "Halo 2" came out. This time, it expects the whole fiscal year to be profitable.