
Microsoft posts record revenue in spite of flat Windows market - evo_9
http://arstechnica.com/#!/microsoft/news/2011/07/microsoft-posts-record-revenue-in-spite-of-flat-windows-market.ars
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Shenglong
_the only division to post a drop in revenue was the Windows and Windows Live
division_

If Live Messenger is any indication of how this division operates, the reason
for this is exceedingly clear. They manage to make their software less user
friendly, slower, more of a memory hog, and crash more with every major
update. Additionally, they manage to cut out distinguishing features absent in
competitors.

~~~
moheeb
I would have to agree. In recent years I'd have to admit that most Microsoft
software has been improving...but not Live Messenger. You'd think removing all
the features would make it work better. Not so.

No wonder they bought Skype. It must have been for the UI IP. ;)

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MikeCapone
"Online services revenue grew by 17 percent year on year to $662 million for
the quarter. Full year revenue was $2.56 billion, up 15 percent. The growth
came on the back of a 20 percent increase in advertising revenue, primarily
driven by search. The division continues to make losses, however, and in spite
of the revenue growth, the losses also grew, up 9 percent to $2.55 billion.
Profitability for Online Services remains elusive."

I guess it's not that easy to compete with Google...

~~~
kenjackson
To really compete in the search game against Google they pretty much have to
spend about half the amount that Google does on search, but only get about 11%
of the revenue that Google gets.

I think what MS correctly sees is if they can drive up marketshare in search
they'll revenue number will grow linearly, but their costs will grow much
slower (as they're already largely all in headcount and advertising wise. The
big delta would be to get the number of data centers that Google has).

I think its a sound strategy, but they're going to need to more than double
their current marketshare before they break even. I think they originally
thought that Yahoo would do it, but the Yahoo deal seems to have problems that
are hard to pinpoint, at least for an outsider.

~~~
jdp23
As a strategy it reminds me a lot of trench warfare in the first world war.
They've been trying it for years and years without success so it's hard to see
what's going to change.

~~~
kenjackson
A few things can change:

1) They can the Yahoo partnership working well. In which case they may
actually be able to break even with current marketshare. Only MS and Yahoo
really know what is broken right now.

2) If Bing continue to grow at this rate they'll be break even in 3 years. Is
it worth $7.5B more to have a breakeven search business?

3) Competing on search means that Google has to continue to throw resources at
search. MS and Google are both playing the game that they're attacking their
competitors strength, so their competitor has to spend a lot resources playing
tower defense.

4) Mobile is still largely up for grabs. MS probably realizes that Bing is in
a good position to get 30-50% marketshare, especially if WP ever gets 20%
marketshare.

While a lot of people like to say, "look at the money they're losing, they
should just quit". I honestly don't think they can.

~~~
jdp23
Microsoft's strategy back in 2006 was to become #2 in a search duopoly, with a
strong focus on the most lucrative forms of search. They've largely executed
on it; spending Yahoo into the ground was a key part of it. And they've also
increased their search quality, and with Bing's UX differentiated themselves
from Google. Kudos to them.

In the process, though, they've starved the rest of their investments online.
Remember when MSN Messenger was #1 in a lot of the world, and so was Hotmail?
Remember when Spaces had initial momentum in the photo-sharing/blogging world
and they were about to introduce Circles? Remember QnA, which had a shot at
combining with algorithmic search to duplicate Naver's approach in South
Korea? In order to devote resources to search, MS underinvested in the product
in all of these areas. For the last several years Google has been far less
resource-constrained than MS so #3 cuts against MS.

> Is it work $7.5B more to have a breakeven search business?

You do the math. What's the ROI from investing $7.5B and getting 0 return?

Apparently though that's not how they're making decisions.

~~~
kenjackson
_with a strong focus on the most lucrative forms of search_

Their revenue hasn't shown they've achieved this. Their search revenue seems
about inline with what you'd expect for their marketshare. Not
disproportionately higher.

 _Remember when MSN Messenger was #1 in a lot of the world, and so was
Hotmail? Remember when Spaces had initial momentum in the photo-
sharing/blogging world and they were about to introduce Circles? Remember QnA,
which had a shot at combining with algorithmic search to duplicate Naver's
approach in South Korea?_

Win Live Messenger ist still #1 in a lot of the world. I Think its #1
worldwide in fact. Hotmail is still top 3 probably (Yahoo, Hotmail, GMail?).
But honestly I don't really remember anyone using the other ones. I recall
Spaces, but no one was really using it. I donm't recall QnA at all.

I think what MS tried to do was focus. And they decided that search was their
focus area in the online space. I don't think it was an unreasonable call. And
frankly, I think if I were in charge, I'd do the same thing. And if I were
running MS today, I think I'd continue to invest in search -- especially
mobile.

~~~
jdp23
Well, starting with a position of strength everywhere but search, they've been
losing a billion dollars or more a year. They just had to spend $8.5B buying
Skype in a market that Messenger should have owned. Microsoft doesn't even
have a social network offering. Google's lead in search has continued to grow.

I said at the time that focusing primarily on search was the wrong call. It
sure seems to me like results since then have proven me right.

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unsigner
Only on hackernews: 12 comments and no mention of xbox, one of the powerhouses
behind this result. Guys, there's more to this world than cloud, JavaScript
and iPhone apps!

~~~
code_duck
If it makes you feel better, the first thing I thought upon seeing the
headline was 'well, the Xbox market certainly isn't shrinking'.

------
known
Companies _officially_ declare earnings once a quarter. Isn't day trading
purely insider/speculative?

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jdp23
"Online services revenue grew by 17 percent year on year to $662 million for
the quarter. Full year revenue was $2.56 billion, up 15 percent. The growth
came on the back of a 20 percent increase in advertising revenue, primarily
driven by search. The division continues to make losses, however, and in spite
of the revenue growth, the losses also grew, up 9 percent to $2.55 billion.
Profitability for Online Services remains elusive."

Makes GroupOn look like pikers ...

~~~
nivertech
Revenue ($2.56B) = losses ($2.55B) ?

