Microsoft has picked an unfortunate time to become more open in its financial reporting, at least from the standpoint of Microsoft Business Solutions, because the MBS operating results are bathed in red. Microsoft began reporting division results, including those of MBS, in the first quarter ended September 30.

Competitors have whispered for some time that MBS, the umbrella for software marketed under the names of Great Plains, Solomon, Navision, and Axapta, could not possibly be turning a profit and they were right. MBS had $107 million in revenue for the first quarter, with operating losses of $68 million. Those results did not include a full three months of revenue from Navision. But don’t blame Navision for the red ink. A year earlier, MBS, then primarily Great Plains and Solomon, with a few million of bCentral, had $74 million and had a $39 million operating loss. It went 52.7 cents on every dollar of revenue to losing 63.6 cents on every buck. And in its last publicly related quarter ended Nov. 30, 2000, Great Plains had operating losses of just under $8 million on revenue of $75.5 million, or 10.5 cents on the dollar. It’s not an upward movement.

What’s at work? Certainly the economic issues that hit all financial software vendors play a role. Best Software talks about the alleged ability of Intuit with QuickBooks and Best with Peachtree to choke off Microsoft’s air supply since MBS doesn’t have an entry-level product. Best has used installed base upgrades effectively with 31 percent of its new MAS users coming from Peachtree, not a bad asset in a down market. And perhaps MBS has simply been sidetracked by acquisitions. Great Plains bought RealWorld in January 2000, moved quickly to buy Solomon, and no sooner was the deal inked than Microsoft purchased Great Plains and then picked up Navision. These things sidetrack management from focusing on acquiring revenue. Instead, they must deal with reporting structures and resolve intra-divisional rivalries. (For example, MBS president Doug Burgum reportedly tried to get to $1 billion by asking for control of Microsoft Project. He didn’t get it. Meanwhile, reports of Great Plains and Navision people hitting heads continue to circulate.)

However, in a world where meaningful numbers have been hard to come by and investors are demanding them, Microsoft is to be applauded for its openness. It gives the press, investors, and the channel a way to figure out the company’s direction, the challenges, and possible solutions.

The move seems to be part of a general openness, at least as it concerns MBS central in Fargo. At the Stampede reseller conference, MBS announced visible pricing, with price levels and resellers discounts now displayed via the Internet. A year ago, information on margins was tough to come by. MBS also surprisingly coughed up figures about the size of its installed base product-by-product.

Information is money. Channel partners and their clients can only be helped by this currency. Appreciate it. Spend it wisely.

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