Microsoft (MSFT) on MSN (quotes from the conf call)

Microsoft (ticker: MSFT) commented on MSN and its new search service in its conference call. Here are the relevant quotes:

MSN reported an increase in revenue of $42 million or 8 percent. MSN's advertising revenue increased 17 percent for the quarter from strength in display advertising and solid international growth. During the first half of the fiscal year [the second half of calendar 2004], MSN implemented a program called Clarity in Advertising aimed at improving the user experience on MSN Search. This program removed paid inclusion and reduced the number of advertisements…

As expected, revenue from Internet Access decreased 14 percent as narrow-band subscribers continued to migrate to broadband or other competitively priced ISPs.

MSN has been performing well in advertising, but those results have been masked due to the decline in access revenue. The business is in a fiercely competitive space. Microsoft will have to do what it has always done. Innovate relentlessly and make important investments like our clarity in advertising program to improve the user experience and grow the customer base and thus maximize the business model for the long term. This will reduce short-term monetization due to having fewer ads. Therefore, full fiscal-year revenue [ends June 2005] is expected to increase 1 to 4 percent, down from our prior guidance, and we expect third quarter [calendar Q1 2005] revenue to decrease 2 to 7 percent.

(Quotes from the CCBN StreetEvents transcript.)