part of the Blog News Channel

Cost Of Windows Live Grows By 889%


Jordan McCollum, Harrison Hoffman and Mary Jo Foley are talking about Microsoft’s earnings report, especially the new numbers for the Online Services Business (OSB). The OSB grew significantly in size, but had a larger operating loss than a year earlier. For fiscal 2007 (July 2006-June 2007), revenues were $2,474 million, up $175 million from fiscal 2006. The operating loss, however, rose from $74 million in fiscal 2006 to a much higher $732 million in fiscal 2007, thanks to $3,206 million in expenses.

As you can see in the chart above, expenses have grown significantly, and revenues are growing, but slower than the expenses. As a result, the profit turned into a loss, and the loss has been growing for about a year. Luckily, once the infrastructure is settled, expenses should stop growing, and they might even start falling, while revenues should continue to rise. If expenses stayed constant, and revenues kept growing, OSB would break even in about five quarters.

Here is the trend, just for expenses:



As far as earnings go, the OSB’s revenue increased 19% to $688 million in Q2, but was far outpaced by their operating loss—$239 million this year, up 28% from $189 million in Q2 last year. The year-over-year data fares even worse: revenue grew only 8%, while operating loss increased one hundred fold from $74 million to $732 million. Losses were largely due to increased costs of labor, content and hardware, according to the release.


According to the report, the Online Services Group, which includes Windows Live, lost 732 million dollars this year, way up from the 74 million that they lost the previous year. Now, what could they have spent 658 million extra dollars on this year. Luckily for us, they let us in on that too. The report sites, “increased data center costs in our Online Services Business,” as the reason for the extra losses.

Another source of extra spending in the OSG was an increased headcount. They are hiring a lot of people and paying them good money…

This is hard evidence, Windows Live isn’t going anywhere, any time soon, especially with a massive investment like this. I’m personally excited to see what they do with it.

Mary Jo:

Microsoft’s Online Systems Business, which is the group overseeing Live (including Live Search), MSN and adCenter among other products, grew revenues in the fourth fiscal quarter primarily as a result of advertising revenue, which Microsoft said was up 33 percent over last year’s Q4, to $544 million.

July 19th, 2007 Posted by Nathan Weinberg | Live, Corporate, Windows, General | no comments

Free Software For Seattlites With Xboxen and Wiiii*

Microsoft is holding a usability study in the Seattle area about the next generation of home entertainment. They’ll come to your house, chat with your whole family, and give you a free copy of Windows Vista, Office 2007, games, or possibly hardware, your choice. You have to live in the Puget Sound area (within 20 miles of Seattle), own a game console (Wii, Xbox, or Xbox 360**), be a U.S. citizen and at least 8 years old to participate.

To get in on this (and really, is it hard to have someone come to your home, ask you questions, and leave you some free stuff?), fill out this form and email this address with your phone number, and a subject of “Console Game Study”.

* - Yes, I decided the plural of Wii is Wiiii, even though you only add two “i”s after a “us”. The official plural of Wii is “Wii Systems”, but this is funnier. I assume the plural of Xbox is Xboxes, but this sounds better.

** - No PS3? I bet they’ll accept it, but they probably figure nobody owns one. :-)

July 19th, 2007 Posted by Nathan Weinberg | Nintendo, Xbox 360, Xbox | no comments

Hosting sponsored by GoDaddy

Microsoft Releases Fourth Quarter Earnings

Microsoft has released its earnings report for the previous quarter. Looks good, first year of $50 billion in revenue, beat or met all expectations.

Here’s the summary:

Revenue: $13.37 billion, a 13% increase from 2006

Diluted earnings per share: $0.31
Cost of Xbox 360 warranty program: $0.08
Earnings per share without warranty program: $0.39, an increase of 26% over the prior year

For the entire previous fiscal year:

Revenue: $51.12 billion, a 15% increase over the prior year

Diluted earnings per share for the year were $1.42. ($1.49 without certain charges, an increase of 17%)

Amount returned to shareholders in dividends and buybacks: $31 billion in cash, or approximately 175% of operating cash flow

Guidance for the coming quarter, ending September 30, 2007:

Revenue: $12.4 billion to $12.6 billion.

Operating income: $5.0 billion to $5.2 billion.

Diluted earnings per share: $0.38 to $0.40.

Guidance for the coming fiscal year, ending June 30, 2008:

Revenue: $56.8 billion to $57.8 billion.

Operating income: $22.2 billion to $22.7 billion.

Diluted earnings per share: $1.69 to $1.73.

The Xbox 360 charges were $1.057 billion.

Research and development: $1.948 billion, up $87 million

Sales and marketing: $3.329 billion, up $507 million

Cash on hand: $6.111 billion, down $603 million

Division, in millions:
Client: Revenue - $3,808 up 14%, profit - $2,818 up 11%
Server: Revenue - $3,082, profit - $1,054, both up 15%
Online Services Business: Revenue - $688 up 19%, operating loss - $239, down 28%
Microsoft Business Division: Revenue - $4,633, profit - $2,994, both up 19%
Entertainment and Devices Division: Revenue - $1,159, down 10%, operating loss, $1,199, down 183%
Corporate expenses: $1,439, up 4%
Cost of Revenue: $3,237, up 52%
Research and Development: Costs - $1,948, up 5%
Sales and Marketing: Costs - $3,329, up 18%
General and Administrative: Costs - $868, down 22%

July 19th, 2007 Posted by Nathan Weinberg | General | 5 comments

What To Expect From Microsoft’s Earnings

Microsoft delivers its earnings report at 5:30 pm Eastern today. Analysts were projecting Microsoft to report quarterly earnings of 39 cents per share, at the high end of their guidance for the quarter. However, taking into account the $1 billion charge for Xbox 360 warranty problems, they predict a mere extra loss of 7 cents per share, down to 32 cents.

Todd Bishop has some background on what to expect, including that PC sales grew $300 million, or 11-13.5% year-over-year, and PC shipments rose 12.5% on the quarter.

July 19th, 2007 Posted by Nathan Weinberg | Corporate, General | 2 comments

Got A Email Address!


LiveSide just posted a new hack for getting a email address (as opposed to, and it worked B-E-A-utifully. I got a nice vanity email to match my Gmail address, and you should head over there and try it yourself.

Here’s how it works (and hurry, they disable these hacks pretty fast):

  1. Go to
  2. Click “Sign Up”
  3. Click “Get it free”
  4. On the next page, Sign Up For Windows Live, change the URL in two places. Where it says hmnewuser.aspx, remove the letters “hm” at the beginning. Then, find where it says &hm=1 and just delete that. Press enter.

That’s it! The signup page should now say for the email address you are choosing, instead of Enjoy your new cool email domain, baby!

July 19th, 2007 Posted by Nathan Weinberg | Live, Hotmail, Windows | 5 comments

David Webster, Pushing Microsoft To Cooler Brand Names

Ina Fried profiles David Webster, the general manager of brand strategy for Microsoft, who has been slowly moving the company away from boring code names since he was hired for the post two years ago. Webster, formerly managing director of naming experts Siegel+Gale, has been behind the movement away from long-winded code names to things like Silverlight, Popfly, Surface and others.

In recent months, Webster and team have held in-person seminars and offered Web-based training on how to come up with better product names. The group also put several dozen posters around campus with a box of Band-Aids and the caption: “You wouldn’t call it Wound Healer 2.0.”

(via Heather Hamilton)

July 19th, 2007 Posted by Nathan Weinberg | Corporate | no comments

Already Some Real Good Home Server Add-ins

If you’re planning on getting a Windows Home Server in a few months, you’ll be pleased to know the community is already hard at work creting add-ins for the operating system. We Got Served has a list of eleven already, and some are really cool, like the µTorrent one, that lets your Home Server download from Bit Torrent networks, keeping the work off your main PC.

There’s also a TiVo publisher, which sends music, videos and photos to a TiVo in the house, Photosync (which we’ve talked about), which automatically uploads photos on the Home Server to Flickr, and WebGuide, which lets you stream your media from a Home Server, and can connect to Media Center machines to stream Live and Recorded TV over the internet.
(via eHomeUpgrade)

July 19th, 2007 Posted by Nathan Weinberg | Home Server, Server, Windows | no comments