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Microsoft spreads value of patience to stockholders
When Microsoft Corp gave its annual presentation to investors and analysts here on Thursday, executives preached the value of patience to stockholders nervous about the world's largest software company's online prospects.
- By Joseph Mennand Alex Pham, Los Angeles Times-Washington Post News Service
- Published: 23:41 July 25, 2008
Redmond, Washington: When Microsoft Corp gave its annual presentation to investors and analysts here on Thursday, executives preached the value of patience to stockholders nervous about the world's largest software company's online prospects.
Executives held up the entertainment and devices division - home of the Xbox game console, Zune media player and cell-phone software - as a prime example of persistence rewarded.
After investing $6 billion since the 2000 introduction of Xbox, the division last week reported its first annual operating profit, of $426 million, aided by the blockbuster release of Halo 3.
"The credibility of entertainment and devices has now been established without question," division President Robbie Bach said in an interview. "We want people to say, 'They've got a strategy. They've grown. Microsoft has a serious play in the consumer space'."
There won't be such talk around Microsoft's online services business. Last week, the company announced plans to invest up to $500 million more into the money-losing division during the just-started fiscal year, adding to a sense of alarm created by the thus-far unsuccessful attempt to buy Yahoo Inc. or its web search business.
Struggles
Highlighting its struggles, Microsoft said Wednesday that Kevin Johnson, the executive who led its bid for Yahoo as president of platforms and services, was leaving the company. A person familiar with the matter said Johnson was leaving to become chief executive of Juniper Networks Inc., which could not be reached for comment.
Microsoft said the division Johnson ran would be split in two: Windows/Windows Live and online services.
"They are trying to catch a runaway freight train," Citigroup analyst Brent Thill said of Microsoft's pursuit of Google Inc. in the market for online advertising. "They are laying tracks, and Yahoo has tracks laid too. Now that the likelihood of buying Yahoo has dropped, they're back at square one."
Microsoft's stock has fallen by more than a quarter this year, despite strong earnings growth, because of such concerns. Facing what analysts predict will be the toughest questioning in years, Microsoft Chief Executive Steve Ballmer and other leaders will point to the company's history of investing heavily before hitting a big payoff.
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