Analysts have been underwhelmed by Microsoft's latest quarterly earnings as well as the company's predictions for the next three months.

The company's net profit was $4.3bn (£2.2bn) in April to June.

That is 41% higher than a year earlier, when Microsoft took a $1bn charge to fix faulty Xbox 360 consoles.

However, shares still tumbled as these earnings were not as high as the market had predicted they would be.

Also, for the current quarter, the computing giant predicted earnings of 47 to 48 cents per share, less than the expected 49 cents.

The area hardest hit by talk, and now actual signs, of an economic slowdown, has been online.

Microsoft admitted that its online division, which relies on online advertising, lost $488m last quarter.

That figure was almost double its loss for the same period of 2007.

"This is the area where we're seeing direct impact from the economic slowdown", said Microsoft's chief financial officer Chris Liddell.

The ongoing battle between Microsoft and Yahoo over a possible takeover is also reported to be making investors and analysts nervous.