WinInfo Daily UPDATE, April 26, 2004

MSN Messenger Update Adds Games MSN Toolbar 

This week, Microsoft will finally release MSN Messenger 6.2 the company's most recent Instant Messaging (IM) client, which adds online gaming interoperability and an optional installation of the MSN Toolbar for Internet Explorer MSN Messenger, currently has more than 120 million users according to Microsoft.

Despite its minor version number change, the earlier version was 6.1. MSN Messenger 6.2 contains two major updates. First, the product now integrates with Microsoft's online games through the new MSN Instant Games Clubhouse, which features access to familiar head-to-head game titles such as Wheel of Fortune, MSN Instant Games Chess, and Bankshot Billiards as well as a game called UPWORDS. The popularity of online gaming is booming with nearly 50 million people already jumping on the Internet instead of pulling a boxed game from their closets when they want to play games. Blake Irving, corporate vice president of MSN Communication Services and Member Platform Group, said "Gaming with MSN Instant Games combines the best of both worlds bringing some of the most popular boxed games to life online while enabling people to connect with their friends or rivals in gameplay wherever they might be." MSN Instant Games Clubhouse is available only in the United States and isn't free. Subscribers must pay $4 to $5 a month for each new head-to-head game Microsoft says, although the company also offers seven free games.

MSN Messenger 6.2 also includes an optional installation of the MSN Toolbar for Internet Explorer, which Microsoft says users have downloaded 1.2 million times since its release in January. The toolbar provides pop-up ad blocking and Web search functionality as well as quick access to various MSN online services.

Small changes in MSN Messenger 6.2 include emoticon autocorrect functionality, a connection troubleshooter and contact list improvements related to mobile device users. Microsoft routinely makes changes of this kind with minor MSN Messenger upgrades.

Microsoft originally released MSN Messenger 6.2 Thursday, but pulled it because of unnamed technical problems. The company will release the product again this week. "The 6.2 client is currently on hold," a Microsoft spokesperson told me.

Microsoft isn't the first company to integrate online games into its IM client. Last week, AOL's ICQ subsidiary released ICQ 4.0 which includes new games and other features. And Yahoo is set to release a major IM version today called "The All New Yahoo Messenger" which will let users more easily tie into the company's online games service. The new Yahoo client will also feature a completely reworked UI and integration with Yahoo services such as photo sharing, Address Book, and LAUNCHcast Radio.

Microsoft Quarterly Results Revenues Up, But So Are Legal Costs

Late last week Microsoft released its earnings for the quarter that ended March 31 posting record revenues of $9.18 billion. But Microsoft's earnings were down almost $800 million to $1.32 billion thanks largely to a series of one time legal payments that included a $1.9 billion payout to Sun Microsystems and a $603 million fine to the European Union (EU). On Friday, Microsoft's results led a tech market rally, however, with Microsoft's stock surging 5 percent to 27.20.

"It was a great quarter for us," Chief Financial Officer CFO John Connors said. "We're pleased to report good results across the board. Every one of our businesses came in where expected if not better." Indeed, even the previously lackluster business units responsible for MSN and the Xbox reported huge gains and positive earnings. Xbox sales were up 30 percent in the quarter thanks largely to a $30 price cut. And MSN's online ad revenue jumped 43 percent in the quarter, rivaling the ad earnings of Yahoo, its main competitor.

Microsoft's historically strong business units also experienced strong growth revenues from the product groups responsible for Windows. Windows Server and Microsoft Office products grew 17 percent. The Client Group Windows products brought in $2.9 billion for the quarter; the Server and Tools Group, Windows Server, Microsoft Exchange, and Visual Studio products hit 2.2 billion and the Information Worker Group Office products hit 2.3 billion in sales for the quarter. Other businesses did well too. Mobile and Embedded Devices jumped to $61 million in sales and Microsoft Business Solutions, formerly Great Plains, hit $153 million.

Looking forward, Microsoft gave analysts its standard conservative forecast warning that fiscal 2005, which starts July 1, won't be as robust as the previous year thanks to a weaker dollar and the way the company realizes profits from long term contracts. Nevertheless, Connors said that PC unit growth will be in the single digits, a hopeful sign for people who are anticipating the end of the tech slump. "Certainly Microsoft's earnings will be dramatically affected in a positive way if the company can put its many legal battles behind it. We have worked hard to clear up a substantial amount of our legal exposure. Time Warner, Sun, and all but a handful of the state class action suits," Connors said. "Tremendous progress has been made. We are still on track to be able to share more details by the financial analysts meeting this July." The company reported its cash and short term investments hoard now totals $56.4 billion, up from $53 billion at the end of 2003.

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