Microsoft just announced quarterly earnings and they are not pretty. Total revenues are down 17 percent to $13 billion, and net income is down 29 percent to $3 billion. Every business got hit hard, but the worst-performing business by far was the online business. It had the biggest operating loss of $732 million, which was $1 million more than its revenues of $731 million.
That means that every dollar of online revenue was wiped out by a dollar of operating loss. And those operating losses really stack up. For its fiscal year (which ended in June), the online business showed an operating loss of $2.2 billion, nearly twice as much as the year before.
Despite the much-ballyhooed launch of Bing, search revenue was flat in the quarter was flat. You’ve got to wonder how much of the ballooning operating loss is going into Bing, and whether those investments will ever pan out.
The client business (Windows), isn’t doing so hot either. Revenues in the quarter were down 29 percent to $3.1 billion, and it made $1 billion less in operating profit. The Entertainment business (Xbox) saw quarterly revenues decline 25 percent, but managed to reduce operating loses to only $130 million. 1.2 million Xboxes were sold in the quarter, and each Xbox owner has now bought an average of 8.6 games. At least servers and Tools under Bob Muglia seems to be holding up. Its revenues of $3.5 billion were only down by $200 million and its operating profit of $1.3 billion was essentially flat. (Click on segment breakdown below to enlarge).
MSFT has again beaten the market predictions. Everyone was expecting good results from MSFT specially after excellent performance by Apple and Google.
I wish I have sold my MSFT stocks today morning
Bing came late, only 1 out of 3 months of the quarter, author need not have made unnecessary sounds over it. Currently MSFT is investing on online development and promotion, the situation will improve over time. And client development of Windows 7 RTM.
Still MSFT’s 13 billion is bigger than AAPL’s 8b + GOOG’s 4b together. Google’s 30% revenue growth days are over, now everyone have to struggle for bread.
even i feel the same!
Ugly numbers, especially for a company like MS, whose reach is much wider than 98% of the companies out there.
Ya cant beat Apples quarterly earnings
Actually they did.
Actually they did.
To increase their bottom line they have to look at those who are successful with their core online business. Bing is cool but trying to catch up with the search engine giant Google will not help. Don’t try to out search them to out think them. O yeah don’t try to buy them either that could get very very UGLY.
looks like you miss interpreted the figures, the loss reported has brackets around it… two negatives make a plus…
dude, really?
http://www.theb...-5000-jobs.html
….
Microsoft announced the job cuts as a means to combat a sluggish software market
…
is this really true?
thats the only site that has reported it, so, maybe?
I don’t know who and what to believe online, The business Journal had a post that MS to cut 5000 jobs starting today.
Now the link is gone, was it a trick to get more trafic, or what would be the motive?
the ship has started to sink… there is no excuse for 17% ($1B+) decline in REVENUE and missing the estimates…
their strategy is deeply flawed… You can’t increase revenue by focusing on saving the last generation products (Windows, Office, Mobile, etc…) and trying to win lost wars (Search/Advertising)? Does anyone see a current product from MSFT that will be around/relevant 5yrs from now?
they must innovate in core areas (Cloud, Devices, and SaaS) and look into the future…
innovating in those areas probably won’t bring the billions that windows was bringing in. They not only need to innovate, but, must replace the huge revenue stream that is declining.
i hope this gives a reason to look at the joker at the top and question his strategy and execution of the business… this is simply not expected from MSFT when the competition (AAPL, GOOG, etc.) is doing well even in the tough economy…
Incompetent joker should LEAVE!!! No Question…
MS was getting revenue mostly because customers were/are option less, and still MS should focus giving priority to its CLIENTS. The approach dumping whatever MS thinks is a product while ignoring to listen to what clients want will damage MS in the long term
Doesn’t that mean every dollar of revenue was wiped out by TWO dollars of costs?
Yeah, the title makes no sense at all. These guys need to stick to covering Twitter rumors. Basic financial analysis eludes them.
I’ve zero business acumen but as i mentioned above those the reporting of -732 on a consolidated operating loss sheet not mean that the 732 is actually profit.
Revenue is $731M.
Expense is $732M.
So, with $1M of extra expense (read: loss), a dollar in is a dollar out.
So the title is correct, except for 1/731=.001366…
thanks for the clarification
You need to stick to twitter rumors as well. And go look up the definition of Operating Income (Loss).
Nope. Your math is wrong.
Revenue = 731
Costs = 1463
Loss = -732
http://www.inve...eratingloss.asp
azer’s got it right. Come on people (TechCrunch especially).
If you have a dollar in income, and you end up losing a dollar after doing the accounting, that means it costs 2 dollars to earn the dollar of income!
Ditto that comment. The loss means that after revenues and expenses, they still lost $732M.
Forget Bing. Most of these search engines are all the same. They all provide results for so they can gain market share.
I just saw that Infospace launched a new Search Engine that’s helping The Humane Society and Big Brothers/Big Sisters.
Check it out – http://www.dogreatgood.com
Thats the kind of site I like to support. Either way, I still have to find the result I’m looking for no matter where I search and this site uses all the engines in one.
I’m not sure if it will beat either of them, but it makes me feel good to help.
Tay
open source and other saas platforms is finally having an impact on msft revenues.
their online business is a sinkhole
Come on. Of course software revenues are down. IT & Consumers are holding out for Windows 7. They have released no products (other than Bing) this past quarter, or year for that matter.
Windows 7 & Office 2010 in the next year are going to be the big story, their was no revenue story this quarter.
A better way to put it would be – every dollar in revenue was a result of 2 dollars in expenses. I don’t think wiping out a dollar in revenue by a dollar in op loss makes much sense…
Don’t count out MSFT. Bing is pretty good, and people are always looking for alternatives.
In the mid 80’s, everyone thought that WordPerfect and Lotus 1-2-3 were locked-in. MSFT entered that market and prevailed. The same goes for databases. Oracle still rules, and people love MySQL, but SQLServer is a very strong product. IE crushed Netscape. Bing came out of nowhere and is making ‘waves’.
I loves my Mac, and it runs Office 2008. I’m not giving that up for ‘cloud’ apps that don’t work on planes (now). MSFT can duplicate Google Docs. Whether they can market and monetize them is the real question.
Without the entire income statement and balance sheet it’s hard to make much sense of the 731/732 number. MSFT investors haven’t paid the loss much heed – the stock is down 7% after hours. That’s not that bad considering.
just sayin.
Just sayin, Bing came out of msn->live claiming decision engine. The last time I check the phrase “why Bing” on Bing, the first page results mostly are related to why Bing will not succeed…
That means as a decision engine Bing is very good at deciding its future.
that means Bing works accordingly to its search engine mechanism, and not bias the search result.
Operating Revenue – Operating Expenses = Operating Income
731 – ??? = (732)
… or $1461.
What you mean to say is, “Expenses are double Revenue.”
That means that every dollar of online revenue was wiped out by a dollar of operating loss.
No. it means that it spent $2 for every $1 in revenue!
Remember this formula?
Revenue – Expense = Income??
Thus, it costs to dollars to bring in dollar of revenue.
If every sales dollar were wiped with a dollar of expense, then income would be break-even or zero. Yet MSFT reported negative income.
obviously. i don’t know why everyone is arguing so much about the technicality when it comes to basic math but yeah the title is a little bit misleading/worded not all together appropriately but we do know that it doesn’t take a just a dollar investment to lose a dollar because then that would be zero like you said. it takes a little bit more to come out negative though. it’s alright cause we got the data to make our own conclusions.
don’t count MSFT out yet…windows 7 may be their chance to increase revenues.
NOT! I sold all of my 530 shares of MSFT when Billy G retired…
My 401k funds might still have shares of MSFT in it, but that is beyond my control over how they manage themselves.
Online does more than generate cash – it is the future of technology, operating systems and software. If they don’t get in the game and have expertise now they’ll go the way of the dinosaur.
Also, online presence helps advertising and spreading awareness of a company’s products and services. If they’re not losing big money, I see no reason why they shouldn’t be in this arena.
great! in addition to this site being home to the twitter rumors, it has now become home for financial analysis and lessons… keep up the great reporting (techcrunch) and participation (readers)…
You have to luv-it, M$ hurtin while Apple and Google improving!
MS has 2 products coming in this year (win 7 & office 2010). I would say during the recession and in a year where there was a only a Bing launch, these numbers aren’t that bad.
MS need to get back to doing what they are good at and what makes them money. Supplying software to businesses. Operating Systems for clients and servers and the best office suite available along with good server products for data basing, email and collaboration.
Ohhh and while I think about it lets not forget that businesses ( the vast majority of people who actually pay for licenses) skipped vista and office 2007 which has probably put a squeeze on the numbers.
First mover advantage (google) does not win the race. This has just begun and to count out the “joker” with a war chest of cash.
Oh, and TC, now that you have your own in-house ad sales force, you may want to double check your own revenue figures since it appears your accounting standards a lacking a bit.
This article is full of fail.
And who cares if MSFT lost $700M in online services. They will get it right soon enough and kick ass.
They have more than enough in the bank and profits from other departments to cover these losses. And for a very, very, long time.
Look at these products right around the corner:
Windows 7 (good/great reviews)
Office 2010 (still most popular suite on the planet)
XBox360 Project Natal (think Wii with real graphics and adult games coupled with Live)
Bing (just started and positive reviews)
I wouldn’t be too worried about MSFT.
Thurrott, is that you?
Maybe you’d see this story differently if they rewrite “Online Services” on the revenue sheets to what the division really is, “Google Cock Blocking”.
YAY microsoft is losing money. Then that’s less money for them to buy up all the small start up companies with.
Two things:
1) Dan, well put. Google is MSFTs sworn enemy and online services job is pretty much to try to keep Google from “winning” online. Everyone moaning about why search needs to think about the machine that Google has become solely based on search. They have all these great “products” that no one actually pays for and it’s because you pay for it by using G-search.
2) Can someone tell me why everyone loves Google so much?! Please? I don’t hate them, but there’s this Google love-in happening everywhere and I just don’t get it. Email is email. Search is search. And frankly, Google as this knight in shining armor doesn’t do it for me since they are like Facebook when it comes to my privacy info. Help me understand please….
yeah this sure is a weak story – even the title is wrong – revenue isn’t wiped out by loss, it is wiped out by expense, profit/loss is the net result.
The maths is wrong as a result..
Hi, Everybody making fuss over the earning of MS. But we must know MS made very easier to learn computer. And created bread & butter for lots of people. See what happned to SUN, they are sticky person not made themselv flexible that’s why today they went on sale. See Gates/Waren how they earned and donated the money. But what rest of the company doning…, Open source is good but what happens when it comes to support.
But MS should think it product must be lightweight so its new product line should work on older system.
There are two simple problems among the many complex ones: innovation and Ballmer. Almost nothing I can recall seeing from Microsoft labs has been productised. Clever ideas dont make revenue (and the ideas were not that clever). I remember once going to an afternoon in their Cambridge (UK) campus to look at their research projects and thinking (like Peggy Lee) Is That All There Is? Things like Photosynth and Surface are almost entirely useless in the real world. Their cool visual search tool Seadragon is still vaporware.
Where they have ‘innovated’ its been by copying the market – games consoles, music players and just throwing money at it to buy market share.
Secondly, there is Ballmer. Save from making entertaining Youtube videos by jumping around conference stages like a complete moron, what they hell is he actually doing? Microsoft’s response to the tidal wave of change in consumer computing and soon in the enterprise looks tardy, half-hearted and above all isolationist. Ballmer talks the language of a business thug. He is obsessed with destroying the competiton rather than satisfying the consumer. He’s about 90 years out of date. He has to go.
The one area of the business i have great respect for is the enterprise products. SQL Server has evolved into something world-class, and what they are doing with Sharepoint, CRM and BI is interesting and ambitious.
“They will get it right soon enough”? How soon is soon enough?
Online Services 2006-2008:
Revenue: $7,987m
Income: -$2,028m
Cost: $10,015m
They spent $10b in three years and lost $2b. Now we find out they spent $5.3b in FY09 and lost $2.3b. What kind of venture capital company throws $5b more at a company after giving $10b at it over three years and losing $2b?
And what is this BS about Google cock blocking? Yahoo has done it better for years and they actually make money.
I sure as hell hope Bing turns this crap around. Can you imagine if MSFT tried to compete on a level playing field with anyone in search?
On Thursday, TheBusinessJournal.com reported that 5,000 employees of Microsoft would be cut from its work force. That decision was actually made in January of thisyear.
The story has been removed from our website. The Business Journal regrets the error.
http://tinyurl.com/lk7brf
How about an update to this article that addresses some of the comments?
As someone who works with Microsoft SEM department and spends a decently sized budget, it’s no surprise that they’re losing money. They hardly dole out account managers, their system is horrendous, and the people who work there for the most part are less than informed.
One of our minor accounts was spending $400/day and then the next day it stopped and they were extremely unhelpful and clueless. Another one of our accounts was spending 1k a day and hten all of a sudden the next day spend got cut into a 4th and you’d think they’d also try to help you out. Again, their customer service was slow, inefficient, and lacked answers.
Search Marketing for SEM is just horrendous.
It’s really a shame. Working with Google and Yahoo is so much easier.
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