Microsoft today reported revenue of $13.1 billion for its fiscal fourth quarter, a 17 percent decline, and earnings per share of 34 cents -- missing, by two cents, the consensus of Wall Street analysts polled in advance by Thomson Reuters.

Analysts had expected more than $14.3 billion in revenue for the quarter.

Microsoft chief financial officer Chris Liddell cited the ongoing effects of the difficult economy, saying that the company's profit margins were helped by continued cost-cutting. "In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter," Liddell said in a news release.

[Follow-up: Microsoft, Amazon shares get pummeled after earnings news]

The company said $276 million in revenue was deferred from the fourth quarter results because of the Windows 7 Upgrade Option program, which lets people who buy Windows Vista PCs upgrade to Windows 7 after its Oct. 22 release. Accounting rules prevent the company from counting those sales as revenue until buyers have the option to make the upgrade.

That reduced earnings per share by two cents for the quarter, the company said. Analysts had been briefed on the potential financial impact of the Windows 7 Upgrade Option when it was announced last month. Microsoft said the revenue deferral was at the high end of its guidance. That appears to indicate strong demand for Windows 7 longer term.

In a conference call with analysts, Microsoft noted that it saw some positive signs, including a sequential increase in Server & Tools revenue from the third quarter.

"At least we are seeing signs now of the bottom," Liddell told analysts. 

"Business trends were softer than expected across all business segments, though continued cost focus helps to offset and should help ballast stock in the near-term," wrote Sarah Friar, a Goldman Sachs analyst, in a note to clients. "Our estimates and price target are under review."

Each of Microsoft's five business divisions saw a decline in revenue.

Microsoft's closely watched Client division, which makes Windows for PCs, posted a decline of 29 percent in revenue, to $3.1 billion. Operating profits fell 33 percent, to $2.1 billion. The company attributed the revenue decrease to weakness in PC sales, particularly sales to businesses. IDC reported last week that global shipments of PCs fell 3 percent last quarter, which wasn't as bad as feared.

Complicating matters for Microsoft was a further decline in OEM Premium Mix, which describes the proportion of manufacturers’ machines that come with high-end Windows editions. It hit 59 percent for the fourth quarter, down 13 percentage points from the same quarter last year. That number has been impacted in part by sales of netbooks, which come with cheaper Windows versions.

Even Microsoft's stalwart Server & Tools Division was affected, posting a 6 percent decline in quarterly revenue, to $3.5 billion, compared with the 2008 fourth quarter. The division makes such products as Windows Server and SQL Server. Revenue from both of those products fell during the quarter. 

The company says the decrease in sales resulted from "a decline in demand for server hardware as a result of the unfavorable economic environment."

The operating loss in the company's Online Services Business widened to $732 million for the quarter, as revenue fell by 13 percent, to $731 million. Online advertising revenue fell 14 percent to $529 million. The company said the main culprit was display advertising.

That result could increase pressure on Microsoft to strike a search and advertising partnership with Yahoo, possibly taking over the search business for both companies and handing over display advertising to the Sunnyvale, Calif., company.

Microsoft, which recently launched its new Bing search engine, has said it remains interested in some sort of partnership with Yahoo to boost its standing against search king Google. Some online reports have suggested that a deal could come together this week or next.

The Entertainment & Devices division also struggled, with most of its businesses seeing a decline. Despite positive recent results in the U.S. console market, worldwide Xbox 360 sales were down slightly, hitting 1.2 million units in the quarter, compared with 1.2 million in the same period last year. At the same time, the company said revenue was hurt by Xbox 360 price reductions over the past year, which was partially offset by increased revenue from the Xbox Live online gaming service.

In non-gaming parts of the E&D Division, revenue was down $291 million, or 42 percent, a trend that the company blamed on results from its Mediaroom IPTV platform and Zune portable music player.

The Microsoft Business Division, which makes Office and related products, also was affected by the tough economy, and decreases in business and consumer spending.

Business revenue decreased $413 million or 10%, primarily reflecting a decline in volume licensing agreement revenue, and included a 13% decrease in Microsoft Dynamics customer billings," the company said in its news release. "Consumer revenue decreased $289 million or 30%, primarily as a result of PC market weakness, a shift to lower-priced products, and pricing promotions on the 2007 Microsoft Office system."

Post updated at 2:20 p.m. with divisional breakdown and analysis, and at 3:20 p.m. with comment from conference call.