The worst-performing division at turbocharged global behemoth Microsoft (MSFT) is–you guessed it–online services. But the news this quarter is actually not uniformly bad:
- Advertising revenue rose 25% on an organic basis, 33% with half-quarter contribution from aQuantive. This is a deceleration from last quarter’s 33%, which is bad, but the absolute growth rate wasn’t horrible. Yahoo, for example, grew only 12% (though revenue on Yahoo’s own properties grew 20%-30%).
- Display advertising rose 23%, which also isn’t bad. That’s about in line with Yahoo.
- Operating loss swelled again, to 39% of revenue, or $264 million, but this included non-cash intangibles from aQuantive. Strip out those, and the organic operating loss was 31% of revenue, or $206 million. Now Microsoft’s online business is only losing $800 million a year!
Bottom line, revenue is growing, and operating loss–finally–is shrinking in absolute terms and as a percentage of revenue. All is not good, but perhaps all is not lost.
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