Office, Windows Cover Microsoft Divisions' Losses


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Four of Microsoft's seven business divisions lost money in the most recent quarter, according to Redmond's most recent 10-Q filing with the SEC. [Attrib:ZDNet.]

Business Solutions, MSN, CE Mobility and the Home and Entertainment divisions were the loss makers. However, these are also the smallest units in the firm on a revenue basis.

Client, Server Platforms and Information Worker divisions were the major revenue earners. Information Worker includes Microsoft Office, Visio and Project.

Interestingly, MS does not supply separate figures for the Mac Business Unit (MacBU), whose revenues, we assume, are categorized under Office. Nowhere in the 10Q filing are the terms 'Macintosh' or 'Apple' referred to.

Microsoft reported consolidated quarterly operating income of over $4 billion on revenues of $7.75 billion for the quarter ended September 30, 2002. Substracting the four loss-making divisions, the three profitable business units earned over $5 billion of the operating income.

Analysis: Mac Office is a small piece of the pie here, but the MacBU's profitability is essential to v.X's long-term health. The MacBU has released some figures previously - probably to prod Apple into some kind of response - but has been wary about revenue figures. While Office 98 and 2001 were handsomely profitable, with 2001 outselling v.X at last count, Office X sold only 300,000 copies prior to the recent price cuts and deals offered jointly by Apple and Microsoft. The MacBU were anticipating 800,000 copies and former General Manager, Kevin Browne, blamed Apple for insufficient marketing of OS X, taking aim at Cupertino's strong marketing of iPod.

Nevertheless, MS's recent price cuts demonstated tacit acknowledgement of the fact that Office was priced too high, and current bundling deals, in place until January 2003, offer much cheaper Office v.X deals, particularly with the purchase of a new Mac. As Apple readies the permanent switch to OS X-only booting in January 2003, it is reasonable to expect more users will upgrade to Office X, rather than run 2001 or 98 in Classic.

[Actually, I still run Word 5.1 in Classic - it's faster than v.X - Ed.]