That's what happened with Microsoft's effort to sell high-end software to big companies. The related division threw off $4.6 billion in operating income in the fiscal year ended June 30, behind only the twin pillars of Windows and Office.
But even as Google and others start to offer traditional software functions as a service over the Internet, many analysts take Microsoft's ability to sell to businesses for granted. They worry more about Microsoft's relationship with consumers, where the company lacks the devotion kindled by Apple Inc., Google and even Yahoo.
For The Record
Los Angeles Times Friday, July 25, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 36 words Type of Material: Correction
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.
For that reason, Microsoft will be talking a lot about digital entertainment.
The company is now a major player, along with Nintendo Co. and Sony Corp., in the $40-billion video game business.
The Xbox Live online game service has been key. Nintendo and Sony offer online options for their consoles, but Microsoft's is more developed.
Since launching its on-demand service for renting movies and buying TV shows last year, Microsoft has amassed more than 20,000 hours of video, making itself into one of the country's top 10 purveyors of on-demand shows. Half of that came from a deal announced last week with Netflix Inc. to supply subscribers with a catalog of movies that can be streamed directly to the television.
At the annual E3 gaming conference last week, executives said Xbox Live customers had spent more than $1 billion on $50 annual subscription fees and downloads of movies, shows and games.
Microsoft counts 12 million Xbox Live users, many of whom play for hours each day. Don Mattrick, executive vice president for Microsoft's interactive entertainment business, said the service demonstrates how Microsoft can transition from a seller of packaged software to providing a platform for all manner of digital sales.
"It's a wonderful case study of how we can provide a service and scale it to millions of users," Mattrick said. "You'll hear this as a common theme at Microsoft."
By becoming a part of millions of living room entertainment systems, the Xbox business succeeded where other Microsoft efforts failed. According to researcher NPD Group, Microsoft has sold 10.5 million Xbox 360 consoles in the U.S. since launching the device in November 2005.
More than half of those consoles are hooked to the Internet, giving the company a potentially valuable portal into consumers' homes.
