Online services unit revenue climbed 25.2% to $671 million compared to $536 million a year earlier. Yet the unit reported a widened operating loss, to $264 million from $102 million.

In the quarter, Microsoft said client segment revenue gained 24% to $4.1 billion over prior year. This unit also includes Windows Vista that was introduced in January. Microsoft said the Russia and China demand was. The company forecast to earn $3.9 billion from Vista.

The company said demand for 2007 Microsoft Office system, Windows Server and SQL Server were very strong in the quarter.

For the fourth quarter, Microsoft has guided revenue in the range of $15.6 billion to $16.1 billion. At full-year, revenue is forecast at between $58.8 billion to $59.7 billion.

Analysts at Thomson Financial estimate fourth quarter revenue at$14.11 billion and $57.4 billion for the full-year.

Operating income is estimated at between $5.9 billion and $6.1 billion while earnings per share are targeted in the region 44 cents to 46 cents.

Microsoft estimated 2007 earnings per share in the range $1.78 to $1.81 and estimated operating income between $23.3 billion and $23.7 billion.

The earnings guidance include nearly $85 million of estimated integration costs and research and development expenses, or a $0.01 impact to diluted earnings per share, due to the acquisition of aQuantive.

Friday morning, Microsoft was up 13.29% or $4.25 at $31.99. In the last 52 weeks Microsoft stock traded in the range $26.60 to $32.22.

9:00AM New York – Countrywide jumps 16% after reporting first quarterly loss in 25 years.

Countrywide Financial (CFC: chart) reported its first quarterly loss in 25 years.

For the third quarter the company reported a loss of $1.2 billion or $2.85 per share. Excluding the impact of the accounting loss related convertible loan issuance, the loss per share was $2.12. Earnings in the third quarter were $648 million or $1.03 per share.

Disruptions in capital markets for mortgage loans securitization, higher credit costs for selling these loans to investors, and continued deterioration in the housing values hurt mortgage issuance. The sub-prime segment of the market felt the most severe credit crunch in the last quarter.

Lending in the third quarter was impacted by tightening underwriting standards. The loan origination volume decreased to $90 billion from $123 billion in the second quarter and $106 billion from a year ago.

The company hopes to be profitable in the fourth quarter 2007 and in the year 2008 despite its expectations of weak housing market.

The mortgage broker relied on securities market for its mortgage loans and is now taking steps to rely on its depositor base. The Countrywide Bank was the source of 90% of its mortgage loans, a stable source of loan origination.

''Countrywide''s results for the third quarter of 2007 reflect the impact of unprecedented disruptions in the U.S. mortgage market and the global capital markets, as well as continued weakening in the housing market,'' said Angelo R. Mozilo, Chairman and Chief Executive Officer. ''However, during the period we also laid the foundation for a return to profitability in the fourth quarter.”

Mozilo explained, “During September, Bank funding approached 90 percent of total funding.”

The Bank, which is presently the 3rd largest Federal Savings Bank in the nation, has $8.9 billion or 7.3 percent of total Tier 1 capital at September 30, 2007. Furthermore, the Bank with the deposit base of $60 billion has 150 financial centers and expects to increase to 200 by the year end.

The banking operations reported a pre-tax loss of $389 million compared to profit of $136 million in the second quarter of this year and $378 million profit in the third quarter a year ago.