Microsoft Corp. reported Friday its quarterly sales fell sharply from a year ago and profit that fell from year-ago results but easily beat Wall Street's forecasts.

The software giant's net income fell 18 percent in the last quarter, largely because it deferred revenue to let summertime PC buyers get free upgrades to Windows 7, which launched Thursday.

The earnings announcement topped off a high-profile week for Microsoft, in which it unveiled its new operating system, Windows 7.

Microsoft said it earned $3.57 billion, or 40 cents per share, on revenue of $12.92 billion for its fiscal first quarter, which ended September 30. Microsoft also deferred $1.47 billion in revenue ahead of the launch of Windows 7. Adding that back in, revenue would have been $14.39 billion and per-share earnings would have been 52 cents.

We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows, CFO Chris Liddell said in a statement. We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions.

Overall, Microsoft reported total revenue of $12.92 billion for the quarter, a 14 percent decline from a year ago that reflected falling sales in its Windows and Windows Live division and its Microsoft Business division.

The company said it had pushed back $1.47 billion in revenue on computers with Windows Vista that would receive upgrades to Windows 7.

Without that deferral, Microsoft said its earnings per share would have been 52 cents instead of 40 cents.

The company said that its operating costs fell by 6.9 percent in the last quarter compared with a year ago, reflecting cuts to spending on research, sales and marketing and administrative costs.

Sales of Windows were down 38.8 percent in the quarter and profits from the operating system division were sliced in half. That was mostly due to a deferral of $1.5 billion in revenue from Vista sales to provide customers with upgrade coupons for Windows 7.