Blodget Bludgeons Windows Live to Death
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How many ways can you say, "screw up?" Henry Blodget tries more than a few ways in describing Microsoft's Online Services group. |
Editor's confession: I'm relocating to San Diego from Washington, DC in about a week. I've been slow reading my RSS feeds and missed Blodget's important analysis of Microsoft's Online Services group, which he posted a week ago. That said...
Blodget, the former Merrill Lynch dot-com analyst, observed "that MSN is currently losing about $1 billion a year (run-rate). That's right, $1 billion. On about $2.2 billion of advertising revenue...That means that MSN is losing nearly $0.50 for every $1 of advertising it sells."
By comparison, "Google's profit run-rate is $4.4 billion on $16 billion of revenue. Yahoo's run-rate is $750 million, on $7 billion in revenue," Blodget said. "All those companies are making money hand over fist. Microsoft is shoveling it down a rat hole."
He's right, of course, about the numbers. It's all there in the Microsoft SEC filings.
In March, I asked, "Who shot Windows Live?" Microsoft's Online Services group was profitable right up until the month of the rebranding to Windows Live from MSN. After November 2005, the division's profit nose-dived off a cliff. Meanwhile, Google and Yahoo lazily graze on the plateau above.
There was a time when people at Microsoft joked about MSN being on the "red side of the campus," because the division was a perennial money loser. After seven years in the red, the division had two years in the black before the Live rebranding.
I often wonder if the problem is too many cooks in the kitchen but not enough chefs. Apple has a very small decision tree, with CEO Steve Jobs having the final say. Microsoft used to be more than way during the Bill Gates era. Now, decisions are done by committee, whether within Microsoft or influenced from without based on response from beta testers, customers or partners.
Microsoft is trying to please everybody and perhaps pleasing nobody. Extremes are often better than shades of gray. Who likes bland? I wonder if the Online Services group would do better with lots more risk and a lot less consensus.
Related Posts
- Microsoft Searches for Signs of Live, Microsoft Watch, Sept. 27, 2007
- Search: What Microsoft Should Do Next, Microsoft Watch, Sept. 24, 2007
- Is Microsoft's Head Really in the Clouds?, Microsoft Watch, July 26, 2007
- Is Windows Live a Killer?, Microsoft Watch, July 26, 2007
- Channeling Microsoft Hosted Services, Microsoft Watch, July 9, 2007
- Which Comes First, Software or Services?, Microsoft Watch, July 9, 2007
- When Is 'Open' More Open for Microsoft?, Microsoft Watch, May 17, 2007
- Microsoft Reorganizes Search, Microsoft Watch, March 21, 2007
- Who Pays for Software Plus Services, Microsoft Watch, March 15, 2007
- Who Shot Windows Live?, Microsoft Watch, March 8, 2007
- Google Catfight About 30 Years in the Making, Microsoft Watch, March 6, 2007
- What Is Microsoft's Services Platform?, Microsoft Watch, March 1, 2007
- Ray Ozzie Speaks Out, Microsoft Watch, February 27, 2007
- Google and Long Tail Computing, Microsoft Watch, February 22, 2007
- Sorry, but Live Isn't Dead, Microsoft Watch, December 12, 2006
- It's a Shame About Ray, Microsoft Watch, December 6, 2006
Comments (11)
Perhaps it time to consider what the EU might do, unbundle Windows from hardware. That is to require that new computers can not be sold with windows pre-installed on them, or a MS tax.
http://www.globalisation.eu/publications/unbundlingmicrosoftwindows.pdf
Posted by chips | October 8, 2007 12:01 PM
http://www.ubuntu.com/getubuntu/countdown
Posted by n0neXn0ne | October 8, 2007 1:31 PM
It'd be great if you, Joe, or Henry would spend a few precious words and minutes trying to drill down in expenses side of the house. One could then easily figure out that "gasp" MSN-Live group's P&L includes all the datacenter building activities (500mln/center) that - "another gasp" - are actually benefitting a lot of other "service-oriented" products in the company. More importantly, such activities would not be recurring on "grand" scale of things. After all, how many centers can be built out there anyway? Check out capital investments made by AMZN, for example - and how depressed their stock was during capital expansion. I am sure you attributed their stock growth this year to their rapid selling, right? In time when economy is sagging...
Posted by Joe | October 8, 2007 1:36 PM
If Microsoft was just smart enough to settle with VCSY, then they could stop all of the "screw ups" and maybe regain some market share, with the release of Viridian, Silverlight 1.1 and other updated products!
Posted by I-Man | October 8, 2007 1:40 PM
Joe, although you may claim the dip in profits is down to capital expenditure it has more to do with branding.
Companies spend an awful lot of money on building up a brand name. A lot more than MS has spent on capital expenditure. Once that brand becomes profitable after years of being unprofitable the very last thing they are going to do is change the brand name.
Then they are back in the same situation again where they have to spend a fortune and good length of time to build that brand recognition with the consumer.
If all products are created equal the one that commands the better brand recognition can charge a premium.
Posted by William | October 8, 2007 3:32 PM
when you HATE a company, you can spin any news...
if the division is too profitable, joe will bring on a series of posts about 'what are we getting, for the amount of profit msft is pilfering from us' aka... joe's posts about windows and office
if the division isn't profitable, joe will bring on a series of posts about 'msft screws up again' aka... joe's posts on Live and Xbox.
Dont you ever get tired of template-journalism joe? your readers are.
Posted by uhura | October 8, 2007 4:39 PM
Uhura wrote: Dont you ever get tired of template-journalism joe? your readers are.
Joe brings us a perspective you won't get from the Micro$oft fan club. If you want to read rosy news about your favorite bunch of thieves and bullies, stick to Micro$oft press releases.
Posted by Maddog | October 9, 2007 4:37 AM
maddog wrote: If you want to read rosy news about your favorite bunch of thieves and bullies, stick to Micro$oft press releases.
LOL, a Joe devotee. How fitting.
Posted by Bob | October 10, 2007 7:20 PM
Maddog
Do they do press releases on you do they?
After all you do try and bully (Uhura for one) people here don't you ?
Posted by Neil | October 10, 2007 8:29 PM
lol neil. was that a bully talking to me? sounded more like a pointless string of random words. Note how I originally used the word "hate", and now read maddog's reply.
"bunch of thieves and bullies"
"Micro$osft"
I stand by my adjective (hate). Get a life maddog.
Posted by uhura | October 11, 2007 6:23 AM
Uhura
He can't himself Uhura he is a linux zealot, and as you have said "hate" seems to come pretty easy for them towards "anyone" who sticks up for Microsoft and then all the nastiness in them comes pouring out of them.
Posted by Neil | October 11, 2007 11:10 PM