Microsoft’s Online Services Business posts $0.5bn loss in Q4 2008

So there’s a bunch of financial results out today, including Microsoft, Google and IBM, all of whom posted strong profit growths in the last quarter (what impending recession?) Anyway I’ve broken down the results for the Online Services Business below, which now show their worst performance since the start of Windows Live (MSN is also included).

Revenue has remained largely flat in the last 3 quarters at just over $0.8bn, which is somewhat worrying given the impressive revenue growth going on over at Google. Also bare in mind the acquisition of aQuantive earlier this year, hence the large revenue jump between Q1 and Q2. In stark contrast, costs have shot up in Q4 to a record $1.3bn, giving an overall loss for the quarter of $0.5bn. Owch.

Here’s the quarter on quarter changes. Click through for larger images + data.

I’ve defended these results in the past (Q4 2007 looks rosy now) and the same logic still applies. More datacenter investments being made for Live Mesh and other online services, and more employees being hired for Search and other Software + Services products.

However posting a $0.5bn loss in one quarter is bad, no matter how you try to paint it, and makes the need for acquiring Yahoo look all the more greater. Admittedly its still not as bad as the $1.2bn loss posted by E&D, the Xbox and Zune division, in Q4 2007 –  the entire OSB loss for 2008 is only $1.3bn. Next year could be crunch time though, with Mesh, Live Search and Windows Live Wave 3 all needing to move up a gear.