MSN: Money Pit or (Not So) Secret Weapon?

Opinion: Windows Live isn't the only area where Microsoft's planning to spend in 2007. But it is the part of Microsoft's business that's under the most scrutiny.

Is Microsofts MSN unit a bottomless money pit, or the strategic lynchpin upon which the companys future depends?

The answer depends on what you think of Microsofts budget for 2007.

Many Microsoft watchers are still reeling over Redmonds spending projections for fiscal 2007, which company officials shared during Microsofts latest earnings call. Goldman Sachs analyst Rick Sherlund, for one, said that Microsoft is planning to spend more than $2 billion more than he expected next year.

And even for a company with pockets as deep as Microsofts, thats a lot of spending.

In no particular order, here are areas where Microsoft brass said they are planning to invest substantially during the next fiscal year (which starts July 1):

  • Building more Xbox 360 consoles;
  • Adding/training more reseller partners and Microsoft corporate sales folks to sell "forthcoming products," especially Windows Vista and Office 2007, due to launch in January 2007;
  • Evangelizing adCenter, Microsofts advertising platform/service;
  • Improving customer support;
  • Improving search, especially in the areas of general relevance, local and mobile;
  • Creating content for MSN and portals;
  • Hardening and adding to the infrastructure that supports online/Live services; and
  • Building and solidifying services, especially in the areas of unified communications, business intelligence, security and high-performance computing

Does Microsofts budget factor in the $600 million antitrust fine that the European Commission has demanded Microsoft pay for abusing its monopoly power (and which Microsoft is appealing)? Microsoft wont say. Does it factor in more stock buyback? No word. What about coupons for consumers who were hoping to get Vista in time for the holidays? We dont know.

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