microsoft_logo_2010.jpgWhile Microsoft's (news, site) other divisions harvest in the cash, Online Services proves to be the company's weak spot, leaking another half-a-billion dollars.

MS Online Services Takes a Beating 

As we wrote earlier, Microsoft is raking in the profits on Windows and Office in its latest quarterly earning figures. However, the Online Services division continues to take a pounding, losing the company another half-a-billion dollars this quarter. That division includes the likes of Bing, MSN, and advertiser and publisher tools.

This quarter's loss of US$ 560 million on revenue of US$ 527 million is worse than last year's quarterly figure of US$ 477 million. In fact, Microsoft is effectively spending US$ 2 to earn US$ 1. Even with a strong rebound in advertising spending, as Bing continues to pick up market share, it will be a challenge to overcome those loses

Elsewhere, we see Microsoft's commitment to the cloud in all areas, including the (separate) Business Division that is responsible for SharePoint Online and business process tools performing well, (see Microsoft Getting Ready to Update BPOS With SharePoint 2010).

Playing the Long Game

A big part of that mission is to win over the smaller enterprises that don't want to purchase expensive servers and software when they can do it cheaply in the cloud. In that scenario, even greater revenue will come rolling in over the long term and won't (Microsoft hopes) damage the big corporate sales of desktop-based Office and SharePoint.

In this business endeavor, Microsoft is in a multi-way fight with Google and specialist vendors from Salesforce to Zoho, each fighting hard for every single dollar that companies are willing to spend in the cloud. 

But for the online division, will Microsoft really recoup the money it spends on advertising Bing? Would the by-the-wayside Yahoo deal have been a better bet?