Since the first quarter of 2005, Microsoft’s online division has lost $10.9 billion.

Steve Ballmer’s Huge Reorg Of Microsoft Could Bury One Of The Company’s Biggest Embarrassments

JAY YAROW JUL. 9, 2013, 11:12 AM 15,119 14

Microsoft may be about to bury one of its biggest quarterly embarrassments.  Kara Swisher at All Things D reports CEO Steve Ballmer is going to announce a big reorganization of the company this Thursday. As part of the reorg, Microsoft’s earnings reports could be totally different. Swisher says Ballmer is considering mashing up the reporting of the company’s divisions. This would allow Microsoft to hide the atrocious performance of its Online Services Division, which is made up of Bing, MSN, and other pieces. Every quarter Microsoft reports earnings, we run a chart showing the giant losses from OSD. Last quarter, for instance, Microsoft’s online division had an operating income loss of $262 million. And that’s a big improvement!  Since the first quarter of 2005, Microsoft’s online division has lost $10.9 billion. Read that again. $10.9 billion. There’s probably never been another company in history that has lost that much money online.

The gawdy losses always hung over Bing, Microsoft’s search engine that’s failed to disrupt Google’s search dominance.  The best you can say for Bing’s impact on Google is that Google has been stuck at 65% of the U.S. search market. If it weren’t for Microsoft dumping money into Bing, it might be at 90%.

Since it’s now clear that Bing isn’t going to defeat Google, Microsoft is changing the conversation around Bing.

It says that thinking about Bing as a foil to Google is narrow minded.

CEO Steve Ballmer recently defended Bing saying that it gives Microsoft an advantage in big data and machine learning. He says this technology is being used across Microsoft in various business groups.

Ballmer has a point. Look at Apple’s biggest product screw-up in as long as we can remember: Apple Maps. Apple’s lack of data and search expertise make Maps a terrible experience relative to Google Maps.

Microsoft has also been talking about Bing integration in Windows 8. It allows a user to seamlessly search the computer, apps, or the web.

The integration of Bing across divisions is the exact sort of thing Ballmer wants to amplify in his reorg.

Ballmer’s plan, according to various reports, is to realign the company around the notion that it’s a devices and services company.

Devices means hardware Microsoft builds, as well as support for Microsoft’s hardware partners. Services is more like software and cloud services.

Bing would likely be considered a “service” in the new organization, and as such, Ballmer could tuck its losses into another group like Servers & Tools, or Windows.

While those groups would appear to earn less money, it means writers and analysts won’t be able to kick Microsoft for losing hundreds of millions every quarter through Bing.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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