Another area of concern for the company is its 10-year search and advertising partnership with Yahoo, signed in 2009. The teaming has not produced the expected income for Microsoft or Yahoo, which Tuesday.

"The number-one priority is to resolve the monetization challenges of the combined ad platform," said Peter Klein, Microsoft chief financial officer, adding that the company is working "very closely" with Yahoo to improve the results. Microsoft's Online Services Division generated $625 million in revenue for the quarter, up from $527 million a year ago.

The IDG News Service