UPDATE 5-Microsoft lifts profit outlook, shares rise 11 pct

(Adds operating margin forecasts, valuations, updates shares)

By Daisuke Wakabayashi

SEATTLE, Oct 25 (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) lifted its full-year forecasts and posted 23 percent quarterly profit growth on Thursday, topping analysts' estimates on strong sales of "Halo 3" and Vista, and sending its shares up 11 percent.

The world's largest software maker raised full-year revenue targets across its business divisions and gave a bullish profit forecast for the crucial, current holiday quarter.

Investors have waited for sales of the new Windows Vista operating system to pick up since its January release. Windows, which sits on more than 90 percent of all personal computers, generates almost 80 cents in profit for every dollar in sales.

"The growth of Windows Vista has finally occurred," said Kim Caughey, senior analyst at Fort Pitt Capital Group.

"Halo 3," the latest installment of Microsoft's flagship shooter franchise video game, also racked up more than $300 million in its first week of sales in September.

Microsoft beat even Wall Street's most bullish forecast with a net profit of $4.29 billion, or 45 cents per diluted share, in its fiscal first quarter, up from $3.48 billion, or 35 cents per diluted share, a year earlier.

Revenue rose 27 percent to $13.76 billion in the three months ended Sept. 30.