Should you think Microsoft;s been spending like crazy in the on line area,
Windows 7 sale, you ain;t observed absolutely nothing yet. (And that;s not counting when or if Microsoft;s multi-billion-dollar bid for Yahoo;s search small business is ever before consummated.)Microsoft missed earnings projections when it introduced its Q4 FY 2008 numbers on July 17. To some firm watchers; shock, it wasn;t Windows Vista — which Microsoft claims to have sold 180 million licenses now — that was to blame. Instead, however again, it was Microsoft;s Internet Systems Small business (OSB), more than anything else, that dragged down the numbers.Still, Microsoft officials told Wall Street analysts not to expect Microsoft to change its OSB investing-for-the-longhaul strategy any time soon. Microsoft is planning to step up its on the net investing around driving usage of Live Search and growing its advertiser base for its adCenter online-ad platform.Chief Financial Officer Chris Lidell told Wall Streeters that “the additional investments of several hundreds of millions of dollars is worth the short-term cost,
Office Pro, given the opportunity to participate in a market where the opportunity is measured in the tens of billions of dollars.”Once it became clear that Microsoft wasn;t going to be buying Yahoo or — at least for the time being, even just its lookup unit — and that Yahoo would do a search-outsourcing deal with Google instead, Microsoft decided to “accelerate our online services’ organic growth strategy,
Microsoft Office 2007 Pro,” Liddell said. Specifically, according to a transcript of Microsoft;s earnings call:“(A)bout two-thirds of the incremental spend that we are planning is related to investments to drive usage of our search offering. We’re dialing up our lookup distribution initiatives with targeted OEM toolbar [alt] lookup deals, scaling lookup globally with investments in localized engineering and data centers, pursuing acquisitions and partnerships to build vertical content to support our commercial strategy,
Office Home And Business 2010, accelerating the rollout of our Cashback program, and increasing marketing inside the company to grow awareness and drive traffic.“Second, we are upping the investments in our ad platform and increasing the number of advertisers and high quality inventory on that platform. Specifically,
Office 2010 Serial, these investments are in the area of accelerating the integration of our ad platform assets, expanding our sales and service capabilities, modest acquisitions to enhance the platform technology, and investments in strategic partnerships to increase third-party inventory available to advertisers on our ad platform.”To be fair, it wasn;t just OSB that impacted Microsoft;s earnings per share. Microsoft claims to have sold more Xbox 360s than its guidance had reflected (resulting in greater cost of goods sold), as well as to have grown consulting and support revenues (both of which “carries higher associated costs than does software revenue”) more quickly inside the quarter than planned.General Manager of Investor Relations Colleen Healy also told analysts yesterday that the lower profits also could be traced to being “able to bring servers in our data centers online faster than expected and we invested in premium on the web content, which is [higher creative and agency fees associated with it].” And then there were high headcount-growth, product development and new marketing campaigns also playing in, she claimed.Do you think Microsoft has no choice but to keep pouring money into OSB? Is there some point at which the Redmondians could/should give up trying to compete in consumer Web lookup and simply focus on other channels (like paid subscriptions for enterprise software/services) inside the on line room?