So now we know how much the delay in Microsoft's (MSFT) launch of its Vista operating system cost the company: $1 billion in profits, and $1.64 billion in deferred revenues. (Profits declined in just-announced quarter to $2.6 billion, from $3.6 billion last year). The question now is whether Microsoft can make it up in short order. Think of those numbers as you are bombarded by Vista and Office 2007 advertising over the next few months.
Given the marketing budget devoted to Vista, Microsoft's Windows business should do just fine this year. The bigger question is how is Microsoft doing with it's so-called growth businesses. (Microsoft Live is so insignificant financially that it was not even mentioned on the earnings call, and Zune was mentioned only barely). One supposed bright spot is Xbox. The company has shipped more than 10 million Xbox 360 videogame consoles so far since it's launch last year. And the Xbox division saw revenues grow 76% to nearly $3 billion in the quarter. Too bad the business is still losing nearly $300 million a quarter.
A second area of intense scrutiny is another money-loser: Microsoft's online services, particularly search. While advertising revenues rose 20% in the quarter, most of that was traditional display ads, as opposed to search ads. During the conference call, CFO Chris Lidell admitted:
Clearly there is a better story on the display side. On the search side, we lost market share. Clearly, we are not happy with that.
If Yahoo is the Avis of search, Microsoft is the Enterprise. Maybe they should join forces.