Microsoft MSN reverts to loss again

SEATTLE: Microsoft Corp.'s MSN Internet division slipped back into the red on an operating basis with a $79 million loss, despite posting its first-ever profit in the previous quarter, the world's largest software maker said in a regulatory filing on Friday.

Revenues at the 8-year-old division, however, grew to $546 million in the quarter ended Dec. 31, compared with $459 million a year earlier, as it shifted its focus toward generating advertising revenue and signing up subscribers for its broadband-targeted MSN services.

Microsoft said that income from subscribers for its dial-up service declined from a year earlier and cautioned that "subscription revenue may decline for the remainder of the fiscal year as the overall MSN subscriber base is expected to continue to decline."

Microsoft's server and tools business, which makes the Windows server and related products, also chalked up an operating loss of $204 million on revenue of $2.13 billion.

The quarterly filing with the Security and Exchange Commission showed that Microsoft's two flagship products of Windows and Office continued to pull the company along during the last three months of 2003.

The Windows division, the biggest, posted a massive $2.07 billion operating profit on $3.06 billion in revenue in Microsoft's second fiscal quarter.

The Office division, covering products related to the document, spreadsheet and presentation package program, had an operating profit of $1.67 billion on sales of $2.9 billion.

Microsoft, which is recognizing more revenue over time as it signs large corporate customers to contracts lasting over several years, has relied on its two biggest businesses to support investment in newer businesses.

The company has also amassed nearly $53 billion in cash and cash equivalents and is spending $6.8 billion on research for its current fiscal year to June.

The Business Solutions division, which makes software for small and medium-sized businesses, had an operating loss of $69 million on $190 million in revenue.

The cell phone and device software business had an operating loss of $112 million on revenue of $63 million.

The home and entertainment division that includes the Xbox video game machine had an operating loss of $394 million on $1.27 billion in revenue.

Including other operating losses of $1.4 billion, partly due to a one-time payout related to a new stock-compensation plan, Microsoft had a total operating profit of $1.478 billion.

© Reuters