There was very little on Microsoft's (ticker: MSFT) Q2 call about its Internet businesses. Here's the key extract, in the words of VP Finance and Chief Accounting Officer Scott Di Valerio:
MSN implemented a program called "Clarity in Advertising" as well as a home page redesign during fiscal 2005. These actions were targeted at improving user experience in enabling us to achieve our strategic objective of sustaining and growing our user base. We believe we're on track to accomplishing these objectives. Among other things, these programs reduce the number of advertisements that are returned for search results or displayed on our home page, leading to lower revenue growth in the short term.
In addition, the Internet Access business continues to decline as subscribers move to broadband. As a result, MSN reported a decrease in revenue of 1% for the quarter, which was in line with our guidance we gave you in April. Advertising revenue grew 22% during the quarter, partially driven by a true-up in performance-based advertising. This growth is offset by a decline of 41% in our narrowband Internet Access business.
Overall, we made progress in building our long-term MSN business this year. We continued to grow our user base and delivered a lot of new products and services, such as our new algorithm search engine, desktop search and MSN Spaces.
(Quotes are from the CCBN StreetEvents transcript.)
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