Microsoft changes the way it reports earnings

SEATTLE - Microsoft

Corp. said on Monday it would report its financial performance starting in

the 2007 business year based on five businesses, down from the current seven

operating divisions.

Microsoft said the change reflects a broad reorganization of the $40 billion

software maker into three divisions with the goal of making the company more

nimble to compete with a diverse set of rivals including Google

Inc. and Oracle

Corp. The reorganization was announced in September.

The company will now report earnings for five businesses: Client; Server and

Tools; Online Services Group; Microsoft Business Division, and Microsoft

Entertainment and Devices division.

Microsoft said it would report its fourth-quarter results on July 20 for the

seven business segments under which the company operated in fiscal 2006. It will

provide its fiscal 2007 outlook under the new structure.

As part of the changes, Microsoft combined its Information Worker unit with

the Microsoft Business Solutions division under Microsoft Business division,

which will include financial results from its Exchange server business and

certain client access licenses.

In total, these changes will shift $1.3 billion in revenue and nearly $1

billion in operating income for the first nine months of the 2006 fiscal year

from Microsoft's server and tools business to the business division, company

officials said on a conference call.

Microsoft's online services group will report results from its MSN Internet

unit and Windows Live initiative, a new set of online services funded by

advertising. Previously, Microsoft only broke out MSN earnings.

The company said it also created a Microsoft Entertainment and Devices

division by combining results from its Home and Entertainment unit and its

Mobile and Embedded Devices business.

Shares of Microsoft closed up 19 cents at $22.48 on Nasdaq.