Another Tremendous Loss for Microsoft’s Online Division


microsoft_small.jpgADOTAS – If you were thinking Apple is an evil empire that’s tracking all of your moves via your smartphone, here’s some news to cement it for you: thanks to spectacular iPhone sales, Apple was $700 million more profitable in the third quarter of fiscal 2011 (net income of $5.99 billion) than Microsoft (net income of $5.23 billion). Last year, Apple’s market cap surpassed Microsoft’s, but the gap has only grown — $318.45 billion vs. $224.43 billion.

One evil empire steps over the husk of another. That is, if you think Apple is evil — I’d say the location data scandal, something that first drew questions last year, just displayed its arrogance.

Microsoft may have surpassed Wall Street expectations with a lot of help from its Office, Xbox and Kinect products, but the numbers coming from the company’s online services division — Bing and MSN, brothers in underperforming — are still gag-worthy. As we noted last quarter, that area has lost Microsoft nearly $2.5 billion in the prior four quarters alone — online services haven’t been profitable in more than five years.

There seemed to be a silver lining though — the losses were dwindling every quarter (if you can call millions of dollars lost dwindling…), suggesting Microsoft may have turned the corner. However, despite a 14% increase in revenue for this quarter the company said was primarily driven by paid search advertising, losses for the quarter were $726 million, down from $709 million the year before. It was the second biggest loss for the division, barely coming in behind third quarter of fiscal 2009.

Bing’s search market share is up to 14% (around 30% if you count Yahoo!, which Bing powers, but Yahoo! still sells and receives… some revenue from search advertising) and online advertising revenue rose 17% during the quarter, attributed to search and display. However, the company admitted that the revenue per search from the Bing/Yahoo! marketplace fell below expectations (something we’ve heard from Yahoo’s camp as well).

Binghoo is starting to have the whiff of a failure… And we’re left again wondering how long Microsoft can shoulder such colossal losses. While Windows income decreased slightly year over year, execs must be feeling in their spines from decreasing PC sales.


  1. How is Apple’s response arrogant?

    “We’re an engineering-driven company. When people accuse us of things, the first thing we want to do is find out the truth. That took a certain amount of time to track all of these things down. And the accusations were coming day by day. By the time we had figured this all out, it took a few days. Then writing it up and trying to make it intelligible when this is a very high-tech topic took a few days. And here we are less than a week later.” – Steve Jobs


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