New York - Microsoft Corp on Thursday said third-quarter profits fell 11 per cent to 4.39 billion dollars amid an economic slowdown in the United States.

Revenue at the world's largest software maker was stagnant at 14.5 billion dollars compared to the third fiscal quarter in 2007. The earnings report, released after markets closed, prompted a more than 4-per-cent drop in shares in after hours trading.

Microsoft is in the midst of an effort to buy internet company Yahoo Inc in the hopes of competing with rival Google and bolstering its online unit, where revenue increased 40 per cent.

The solid online earnings were tempered by a 24-per-cent drop in sales of Microsoft's Windows operating system.

Microsoft expects the situation to improve in the fourth quarter, predicting revenue of between 15.5 and 15.8 billion dollars, and forecast greater profits in the fiscal year beginning July. (dpa)