Overall, Microsoft’s quarterly net profits declined 11 percent to $4.17 billion for the fiscal period ended in December. Operating profits were down 8 percent to $5.94 billion.
If you drill down to the individual operating businesses, every business unit except for Servers and Tools suffered from lower operating profits. The Client division (Windows) took the biggest hit, with operating profits down $440 million to $2.95 billion. (Windows revenues were down 8 percent to $3.98 billion). But Microsoft’s Online Services business (which includes MSN, online advertising, and search) tied for the company’s second biggest loser along with Entertainment and Devices Division (Xbox, Zune)—both saw operating profit declines of $224 million in the quarter.
But at least the Xbox business turned a profit. Microsoft’s Web business nearly doubled its operating loss to $471 million. That loss was on flat revenues of $866 million. Not a good sign for the health of Web advertising.
Update: In the conference call, Microsoft stated that advertising revenues were up 7 percent in the quarter to $664 million and that search advertising grew even faster. But that was not enough to offset the increased expenses in the business.
Losing on the Web is virtually expected for MS – they’re trying to build market share and monetize that later.
Few can operate like that but when you have 90% of software sales outside of the web, you can over reach in other markets to capitalize later.
Google on the other hand, ONLY has web, their profit/loss for 2008 on the web will be more interesting as all their eggs are in one basket.
“Not a good sign for the health of (Microsoft’s) Web advertising.”
I agree with Brian – frankly revenues were flat and investment increased (for online services).
Microshaft has a really immature web policy. They must understand that they can’t monopolize it the way they did the desktop market. They just can’t. They need to grow up and the first thing they should do is admit that Internet Explorer is supremely fucked up.
The first step is to fix Internet Explorer and then to work on the web technology that they offer and make sure that it runs smoothly over all web platforms and browsers.
http://stuckinf...es.blogspot.com
Hear Hear dxtr! I second that.
Step 1: Get rid of IE 6 forever.
Step 2: Reduce the stress of every web developer in the world by 99.9%.
Although it goes against prevailing wisdom to say so, I agree with Brian that Microsoft is essentially in much better shape to weather the “cession (”re” or “de” — take your pick) than the Big G because of the Borg’s diversified product line. Google is titally dependent on ads and basing your all on advertising when the sky is falling may prove to be a bad bet in the long run. The Search biz as a whole may find itself shifting from clicks to some other business model.
Interesting indeed.
Both Microsoft and Google are one trick ponys.
The good news is that Google’s stock price is so low now that Microsoft can actually buy them out.
It would make the best combination for a corporate perspective and make money hands over fist for shareholders without destroying each other in pyrric competition … although this would be a nightmare for consumers and should be blocked every step of the way.
This is why we need a new search player to come along and disrupt the current industry structure.
“Both Microsoft and Google are one trick ponys.”
How so? In the revenue column above presented there are 4 different divisions with roughly similar quarterly revenue (between £3b and $5b). Doesn’t really smack of being “one trick”.
This is because you are looking at things like an accountant.
The fact is Microsoft’s one trick is the Windows platform, and the different moneymaking businesses are dependent on that platform. The fact that they have separated the various businesses dependent on the Windows platform into separate accounting entities does not change this fact from a strategic perspectives, just as it would not change the fact that Google is a one trick pony if they tomorrow decided to change its search advertising accounting into searches between 6-11 am, searches from 11am-5 pm, searches from 5 pm to midnight, and searches from midnight to 6 a.m.
To see some more of my thoughts on these issues please see my blog http://smartbab...xy.blogspot.com, as they are much longer than would fit in this post.
GOOG and MSFT are not “one trick ponies.” This is like saying “oh, well Apple is a one trick pony because it’s entirely dependent on its hardware platform” which is obviously not true either. Are XBox, Windows Server, and all of the enterprise software (SharePoint, the new CRM thingy, etc…) dependent upon the Windows End-User Desktop? No.
What a stupid comment.
I agree, really stupid comment.
Aaron and DumbBabes must be the same person. Dumb.
Smart babes is definitiely right. The Xbox is a Loser business. And that is the point … it is a non Windows platform business and that is why it sucks.
As for Sharepoint and CRM and server, duhhh, have you ever bought a non Windows server from Microsoft? What platform does Sharepoint run on? OSX?
Chris,
Don’t let ignorance stop you from making comments on the Internet.
aaron = idiot
I can’t believe that there are actually still Microsoft fanboys on Techcrunch.
I’d really like to see how well Sharepoint runs on a non Windows environment. Do you really think IE would have even half the market share it has if it wasn’t integrated into Windows, or that SQL server would be used at all if it wasn’t Windows based.
Yes, because Microsoft Powerpoint for Linux sells so well …
It’s astounding to me how MS is in the we business for so long as the major software player and still struggles to make money with their online services.
Microsoft never has – and never will – make anything out of the web. It’s like expecting Oracle to pitch up in the desktop market… it’s just a cultural thing. Their properties are proprietary, messily organised and ever-changing. Google set the bar in one important sense: keeping it simple.
I don’t know a single person who knows what live.com is supposed to be – including one of the engineers who works on the search marketing technology there!
its gonna take an outside gamechanger to set the MS bar. the sweat equity innovation hunger is missing.
Googl simple? algor jumbled results are nonsense with the tech we have today. the G stands for “garbled”. 99.9 percent of there search product inventory is cyberfat. where is the true structure and innovation?
game changers are on there way. G and M better find’em and follow’em and swallow’em before its too late.
MicroLocator.com – little things matter most
It’s bad, but not as bad as it could be (don’t get me wrong I feel sorry for the 5000 losing there jobs). Microsoft is setting the battle grounds up, before sending in the troops. (Wow that made no sense). Basically what I mean is Microsoft CAN afford to be spending on new areas such as Live platform services, and they can afford to put alot of effort behind it. That being said It seems odd Microsoft is still finding it hard to win in this area. I think the company has got to large personally. Windows Live for example does not feel connected enough, sure I can log in with the same details, they need to bring it together. I don’t even know all the Windows Live services that have been released, and I’m rather tech savvy.
“Windows Live for example does not feel connected enough, sure I can log in with the same details, they need to bring it together. I don’t even know all the Windows Live services that have been released, and I’m rather tech savvy.”
Daniel,
Yeah I completely agree. They’ve been hopeless at telling that story. I think http://www.wind...ive.com/explore is an attempt to do that but I’m sure hardly anyone knows about that.
Daniel, you’re almost as incoherent as Gilmore. Next step: Writing for TC!
Wow. Well, now we know where all the rumors of layoffs and cost-cutting at Microsoft were coming from.
More interesting than the web losses (which I expect Microsoft to have) are the decline in Windows and softness in Business.
We’ve been calling MS’s demise for a long time, and for some years now it has not had the power or influence that it once did. Is this finally catching up to its revenue … or is this just due to economic conditions?
I think it could be the latter and even still turn out to be the former when the dust of the current recession settles.
“We’ve been calling MS’s demise for a long time, and for some years now it has not had the power or influence that it once did. Is this finally catching up to its revenue … or is this just due to economic conditions?’
A combination of economic conditions and Vista – many enterprise Windows customers don’t want to update all of their work stations from XP to Vista because of Vista’s general crapiness and backward compatibility issues with important third party software like VPN software, project management systems, in-house projects, etc… Migrating 50+ work stations from one operating system to another isn’t trivial. That’s why many businesses like ours are sticking with XP.
The poor economic conditions don’t help either – nobody is going to replace all of their XP machines if they don’t have to.
To make matters worse for MSFT, a lot of companies don’t upgrade their versions of Office until they update their operating system.
Some of problem are due to Microsoft’s reluctance to accept that the web business model will be and is the future. Google being an early adopter of the web way will suffer significantly less than MS.
Sometimes catching up is difficult and expensive.
google’s model = make a bigger web. a bigger, more complex web means more search and more ad revenue. this is why all their products are free, not because they don’t want to be evil
microsoft, on the other hand, sells products that have little to do w/ expanding the web, which is why they are subject to the market. google is the market. google is macrosoft!
I think their performance is less an indicator about the overall online advertising market, and more an indicator about Microsoft’s specific execution in this space.
Why hasn’t anyone pointed out the giant white elephant in the room?
Semantic – $100 million
Search – $200 million
Not that losing money in these areas is bad, everyone needs to fail now and again and it’s great the Microsoft is at least trying to be innovative, but take away 1 acquisition and the energy expended at flailing at the competition and you could have a break even online business, which is remarkable come to think of Microsoft’s size when they entered the Internet era.
$4.2B put away at the end of the day is a lot of money.
how much of the loss was from the cashback promotions?
I think cashback screwed their online business.
It’s a bad strategy to give money and ask people to use product.
They have to admit that Google is king in search and move on to improve their core.
Vista Still SUCKS !!!
I’m still waiting to hear from the talented (and not at all biased) TC staff about how Yahoo is a failing, dying company, what with never having an unprofitable quarter doing web-only products with much less cash than Microsoft does.
I want to hear more from Asshat Arrington about how it’s Yahoo who should be rushing to sell themselves at any low price MS will throw at them, because they’re the desperate, failing ones, right?
When Jerry Yang said no to Microsoft’s unsolicited piddly offer he was right on the money – MS needs Yahoo much more, and should pay accordingly. Microsoft will keep sinking money into a pit with their shitty web offerings, otherwise.
So the question is whether Arrington is merely clueless (a hack when it comes to covering internet companies) or had a less than objective and honest approach (working with Microsoft’s PR a bit too closely, maybe)? Which is it? Talentless, or shill?
I defer to my favorite blogger.
http://www.usne...or-economy.html
Microsoft Job Cuts: Layoffs Good News for Economy
January 22, 2009 01:04 PM ET | James Pethokoukis |
So Microsoft says it is cutting 5,000 jobs, or 5 percent of its workforce. (Apparently that $21 billion in cash on hand isn’t burning a hole in its pocket.) Now no one likes to see people lose their jobs, especially in a tough economy when it is going to be tough to find another one. But I would bet that these job cuts are going to force a lot of people to find their inner-entrepreneur. These ex-Microsofties are going to end up starting a lot of small businsees that may eventually grow in size to become some pretty profitable companies
here’s an idea. why doesn’t MS outsource its search to Yahoo! instead of the other way around? MS search sucks. always has. always will. Proof is in the pudding. how can you have such low market share in search when you own the dominant web browser that defaults to MSN.com?
I guess buying Yahoo is not a good idea since they are losing lots of money anyway on the Web.
Microsoft’s example makes the truth about web services all the more obvious: Scale won’t magically solve a revenue problem. At some point, these services will have to implement a way to charge users and, as a result, the throngs of users will march away as quickly as they adopted.
More about the implications for web 2.0 and social networking here:
http://traction...rmalink/Blog943