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Even Without aQuantive Charge, Microsoft’s Online Division Loses $1.92 B in Fiscal 2012

The debate following yesterday’s Microsoft earnings report is around the fact that the company posted its first ever loss. That news was tempered by the fact that it took a $6.2 billion goodwill impairment charge from the acquisition of aQuantive. As a result many are saying that aside from that massive charge Microsoft had a good year and is doing fine.

I don’t dispute that at all. In fact, it is very smart and healthy to look deeper in to these numbers to truly understand what is a one time event and what the actual condition of the company is overall.

So in the spirit of looking at the numbers just a little more closely it is really hard to ignore that the online division of the company lost almost $2 billion in fiscal 2012. If you do the oversimplified math that is an average of close to a $500 million a quarter loss to a division that some wonder will ever get the traction it continues to promise to the company and, ultimately, its investors.

MG Siegler sums it up well at parislemon

But hands-down the best part of the release is this:

The Online Services Division reported revenue of $707 million, a 6% increase from the prior year period, and operating loss improvement of approximately $300 million.

“Operating loss improvement”. That’s one way to put it.

In English, the Online Services Division continues to bleed: it lost $479 million last quarter. An improvement, yes — but mostly thanks to less costs. Revenues were only up $40 million.

The division has not posted a profit since 2005.

The bottom line here is the same that it has been for many, many years. The drag that the online services division provides on the overall performance of Microsoft is staggering. And what is most interesting is that Microsoft and its investors continue to act as if this is OK.

They have resorted to using semantics to try to hide the fact that this perennial loser is simply becoming less of a loser. ‘Operating loss improvement’? Really? Translation: “We, Microsoft’s online services division, lost $479 million dollars in the last quarter of fiscal year 2012. But hey, compared to the $742 million we lost in Q4 of fiscal 2011 we are kicking ass. We have lost 36% less than we did last year during the same period. Isn’t that great?!’

Any thinking person would say “No it is not and does anyone understand the idea of making the decision to fish or cut bait?’. If this were a new venture this might be understandable but it’s not new at all. This is a strong company that is allowing its strengths (which won’t last forever, mind you) to carry a perennially massive drag on the overall performance of the company.

Should Microsoft throw in the online towel? Wonder if Marissa Mayer over at Yahoo is interested in buying a rather ragged online offering to add to the world of Yahoo? You have to figure that the price would be right since it can’t seem to make money no matter how long the lights are left on.