REDMOND, WASHINGTON - Legal expenses in its fiscal fourth quarter dragged down Microsoft's net earnings to $2.83 billion (€2.24bn; £1.53bn) versus $3.7bn year-on-year. The charge included an antitrust-related fine levied by the European Union.

The software titan also revealed it will spend $1.5bn on developing new products in the current fiscal year to June 30, 2007.

These will include a raft of previously announced internet services designed to boost Microsoft's slipping position against Google and other web-centric rivals.