Category: Technology  ·  Originally posted March 31, 2009  ·  Last updated August 16, 2012

Where does Microsoft make its money?

THIS INFORMATION IS OUTDATED. Click here to see the updated 2012 report.

Ever wondered which of Microsoft’s product divisions are most profitable?  I have, so today I did some research. Here’s what I found.

What follows are some graphs and explanations of Microsoft’s 2008 revenue.  All information is provided courtesy of Microsoft’s annual 10-K filing (available for download here).

Total Revenue and Operating Income (2008)

Microsoft’s 2008 Total Revenue: $60,420,000,000
Microsoft’s 2008 Operating Income: $22,492,000,000

For those who don’t know, Operating Income = Operating Revenue – Operating Expenses.  In other words, “Operating Income” is the profit made from normal business operations. (A more formal definition is available from Investopedia: “Operating income would not include items such as investments in other firms, taxes or interest expenses. In addition, nonrecurring items such as cash paid for a lawsuit settlement are often not included. Operating income is required to calculate operating margin, which describes a company’s operating efficiency.”)

It is important to note both revenue and operating income, because certain Microsoft divisions make a great deal of money but are not nearly as profitable/lucrative as other divisions.

Revenue and Operating Income by Division (2008)

Microsoft’s products are divided into five divisions: Client, Server and Tools, Online Services, Microsoft Business, and Entertainment and Devices.  The types of products and services provided by each segment are summarized below:

Client – Windows Vista, including Home, Home Premium, Ultimate, Business, Enterprise and Starter Edition; Windows XP Professional and Home; Media Center Edition; Tablet PC Edition; and other standard Windows operating systems.

Server and Tools – Windows Server operating system; Microsoft SQL Server; Microsoft Enterprise Services; product support services; Visual Studio; System Center products; Forefront security products; Biz Talk Server; MSDN; and other products and services.

Online Services Business – Live Search; MSN; MapPoint; MSN Internet Access; MSN Premium Web Services (consisting of MSN Internet Software Subscription, MSN Hotmail Plus, and MSN Software Services); Windows Live; MSN Mobile Services; AvenueA Razorfish media agency services; Atlas online tools for advertisers; and the Drive PM ad network for publishers.

Microsoft Business Division – Microsoft Office; Microsoft Project; Microsoft Visio; Microsoft Office SharePoint Server; Microsoft PerformancePoint; Microsoft Office Live; FAST ESP; Microsoft Exchange Server; Microsoft Exchange Hosted Services; Microsoft Office Live Meeting; Microsoft Office Communication Server; Microsoft Office Communicator; Microsoft Tellme Service, Microsoft Dynamics AX; Microsoft Dynamics CRM; Microsoft Dynamics CRM Online; Microsoft Dynamics GP; Microsoft Dynamics NAV; Microsoft Dynamics SL; Microsoft Dynamics Retail Management System; Microsoft Partner Program; and Microsoft Office Accounting.

Entertainment and Devices Division – Xbox 360 console and games; Xbox Live; Zune; Mediaroom; numerous consumer software and hardware products (such as mice and keyboards); Windows Mobile software and services platform; Windows Embedded device operating system; Windows Automotive; and Surface computing platform.

The 2008 Revenue and Operating Income for each division, in USD, is as follows:

Client (Windows Operating System)
Revenue: $16,865,000,000
Operating Income: $13,052,000,000

Server and Tools (Windows Server, Microsoft SQL Server, Visual Studio)
Revenue: $13,170,000,000
Operating Income: $4,593,000,000

Online Services (Live Search, MSN, Hotmail)
Revenue: $3,214,000,000
Operating income: $-1,233,000,000

Business Division (Office, Project, Visio, Exchange Server, Dynamics)
Revenue: $18,932,000,000
Operating income: $12,358,000,000

Entertainment and Devices (XBox, Zune, Windows Mobile)
Revenue: $8,140,000,000
Operating income: $426,000,000


Interesting, isn’t it? Office generates more money than Windows, but Windows is slightly more profitable.

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