During Microsoft's (NASDAQ:MSFT) earnings announcement last month, executives pointed proudly to the MSN division's first-ever quarterly profit. But the company's 10-Q filing, released yesterday, shows just how close it actually was.
MSN encompasses not only the Internet service -- similar to Time Warner's (NYSE:TWX) America Online -- but also various other more lucrative offerings. The division saw revenue grow 15% overall during the fiscal first quarter to $491 million, despite the fact that subscription revenue fell off 6%. That was more than offset by a 51% jump in paid search and advertising sales.
A couple of weeks ago, MSN was reorganized into two parts: information, which contains the portal, search, and advertising services; and communications, encompassing the subscription ISP, Hotmail, and MSN Messenger. This followed on the decision to discontinue MSN Chat in 28 countries and convert it to a paid service in the U.S.
According to the 10-Q, MSN turned in a $58 million profit during the quarter, compared to a $147 million loss in the prior-year period. A closer look, however, shows the gain came about because of a 25% decline in operating expenses -- which included a $48 million tax refund. Without that, the profit would have been shaved down to $10 million.
Still, after Microsoft pumped billions into it since its inception, it's nice to know the division is no longer a cash drain.
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