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Jul 31 2007   11:28AM GMT

Good News, bad news For Microsoft Business Solutions

badarrow Barbara Darrow Profile: badarrow

Here’s an interesting nugget from last Thursday’s Microsoft Financial Analysts Meeting.

Jeff Raikes, president of Microsoft Business Systems, said the company’s business solutions effort (that’s ERP plus CRM plus related goods and services) surpassed the billion-dollar mark in the last fiscal year.

A spokeswoman subsequently confirmed that this is the first time the company has said that this business hit the magic billion dollar level: Up till last Thursday the word was MBS was “close to a billion,” she said.

The good news here is a billion dollars is a lotta dough. Even for Microsoft The bad news is that this is most certainly a revenue, not a profit number. And given some past publicly-stated ambitions for this group, a billion ain’t so perky.

Witness this quote from Orlando Ayala from June 2003 when he was head of Microsoft’s Small and Midmarket Solutions and Partner Group.

“…this asset, called the Microsoft Business Solutions asset, is $500 million. If we partner closely with our associates in the marketplace and deliver that great value to customers, we will see this business growing to be in the range of a $10 billion business by 2010. This is one of those areas where we see a lot of growth.”

Microsoft proponents would say that figure probably included “ecosystems numbers.” Although that’s not how it appears here. to be fair, company poohbahs started backpedaling from this prediction pretty much immediately.

The fact that Microsoft no longer breaks out MBS financial figures from the much-bigger Microsoft Business Division which includes numbers from the Office juggernaut speaks volume.

You can always bet when a public company becomes less transparent with a group’s revenue or earnings number, there’s a good reason for it. Remember how Oracle used to slam IBM for not breaking out its database numbers? Gee, now Oracle lumps database numbers in with middleware. Hmmm

Directions On Microsoft analyst Chris Alliegro thinks MBS is chugging along nicely, thank you very much.

“They’ve eked out a profit once or twice in the past” he notes. “Now I think CRM sales are good and the ERP sales are holding their own. I’d say they’re close to breakeven in this group. The four [existing] ERP products—that’s what’s keeping the business afloat. They let them acquire new customers and partners while figuring out the future offerings,” he noted. “From a financial standpoint, they can’t throw these things overboard.”

Speaking to analysts on Thursday, Raikes highlighted some other MBS factoids, claiming 21 percent growth in customer billing for MBS overall in FY 07. Dynamics CRM saw 50 percent growth for the year, and added 85,000 new customers in the most-recent quarter. “That,” he added pointedly,” is about the same as Salesforce.com”

For full text of Raikes’ talk, see this Microsoft site.

Barbara Darrow is a Boston-based freelancer and can be reached at badarrow@comcast.net.

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