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Microsoft takes write-down to make up for Internet losses

Microsoft CEO Steve Ballmer looks at a presentstion on a screen during unveiling of the new table Surface during a news conference on June 18, 2012 in Los Angeles, Calif.

David Brancaccio: Microsoft has erased the bulk of its profits for the last quarter. It's taking $6 billion out of what would have been profits to account for big losses in its Internet division. Its search engine Bing and the MSN portal are not bringing in as much money as once hoped.

Here with us live is Marketplace's Mitchell Hartman. Mitchell, good morning.

Mitchell Hartman: Hi David.

Brancaccio: So what went wrong here? Microsoft had such high hopes to rival companies like Google.

Hartman: Well right, and the problem is: Bing. As in, "Hey, David, why don’t you ‘Bing’ that new jazz club?" or "Who’s the president of Uzbekistan? I don’t know. I’ll ‘Bing’ it." Right? Nobody I talk to ever does that; they Google it -- it’s become a verb.

So Google sells more web ads, and it makes more money per ad. Google has about three-quarters of all web search ad revenue. The research firm eMarketer predicts Google’s share will keep going up. Microsoft has invested billions in Bing, and it actually gets some good reviews as a search engine. It’s just not taking off.

David Brancaccio: So what's a big technology company like Microsoft to do about all of this?

Hartman: Well, there are shareholders who want Microsoft to just jettison Bing entirely -- sell it off or close it down. Microsoft CEO Steve Ballmer has resisted that. Instead Microsoft is trying to get more money from each search-ad, and also reduce costs. Bing has a tie-in with Facebook, and the company thinks that’ll be attractive in the long run.

You know, the bottom line: Microsoft execs probably just don’t think they can give up the field of web search and ads to Google, so they have to stay in the game no matter what.

Brancaccio: Marketplace's Mitchell Harman, thank you.

Hartman: You're welcome.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.
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