On Fortune, Adam Lashinsky puts Microsoft's inability to make money from the Internet under the spotlight.
The division in question is Microsoft's Online Services Business. For the quarter ending September 30th, online revenues grew 15%, to $770 million, but the unit lost $480 million - 80% more than the corresponding quarter of the previous year.
"It's quite possible that Microsoft is going after the Internet with too much energy - or at least attacking in too many directions," says Lashinsky. "Rather than carve out some element of the web where it can shine, Microsoft pursues everything."
Lashinsky points out that in contrast to the old mission statement, "A computer on every desk and in every home, running Microsoft software," the company does not appear to be clear about what it wants online.
In agreement is Benjamin Schachter, an online-ad analyst with UBS, who says: "You've had Ballmer and [chairman Bill] Gates telling the world for years that online success is critical for Microsoft. But they don't say what success is."
Lashinsky says that is partly because the company has been busy "playing defense" against Google but he also notes that Microsoft's portion of US search queries was 8.5% in September, according to comScore - down from 10.4% in January 2007 - while during the same period, Google's share rose from 53% to 63%.
However, the author believes Microsoft has $21 billion in cash and a reputation for never giving up in its favour, and Yahoo could still hold the key. Lashinsky concludes: "Mediocrity never sits well with Microsoft, which is why Steve Ballmer made a play earlier in the year for Yahoo. Sure, Yahoo has its problems. But its immense traffic fed through Microsoft's expensive search-ad system could be just what Ballmer needs to end his long quest for online profits."
Why can't Microsoft make money online?
Adam Lashinsky, Fortune, 26/11/08
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