Microsoft sees play as a profit center
The software giant is expected to spotlight the Xbox and online entertainment as a growth driver.
REDMOND, WASH — . -- When Microsoft Corp. makes its annual presentation to investors and analysts here today, executives will be preaching the value of patience to stockholders who are nervous about the world's largest software company's online prospects.
Executives plan to hold up the entertainment and devices division -- home of the Xbox game console, Zune media player and cellphone software -- as a prime example of persistence rewarded.
After investing $6 billion since the introduction of Xbox in 2000, the division last week finally reported an annual operating profit, $426 million, aided by the blockbuster release of Halo 3.
Microsoft: An article in Business on Thursday about Microsoft Corp.'s online prospects said Don Mattrick is an executive vice president for the software company's interactive entertainment business. He is a senior vice president in the division.
"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 Internet search business.
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 would 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, partly because of such concerns about the future. Facing what analysts predict will be the toughest questioning in years, Microsoft Chief Executive Steve Ballmer and other leaders today will point to the company's history of investing heavily over a period of years before hitting a big payoff.
