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Home ent. division, Xbox sluggish

In another sign that the online advertising market is on the mend, Microsoft saw 19% revenue growth in its MSN online division in the fourth quarter while revenue for its home and entertainment segment, whose primary component is the Xbox game console, fell slightly from a year ago.

Revenue for MSN in the final three months of the year, the second quarter on Microsoft’s fiscal calendar, was $546 million, up from $459 million a year ago. MSN makes most of its money from online advertising, and Microsoft specified that that sector saw the strongest growth, with revenue up 47% from a year ago.

The increase is another sign, along with Yahoo!’s 178% increase in advertising revenue last quarter, that the once-beleaguered Net advertising sector is strongly recovering.

Company did not release earnings by group, with MSN chief financial officer Bruce Jaffe — whose unit has traditionally been Microsoft’s biggest money loser — only obliquely stating that the online business is “focused on achieving long-term profitability.”

Home and entertainment revenue, which includes Xbox, PC games and Microsoft’s struggling interactive TV division, was down 5% over the year-ago quarter to $1.26 billion. Company reported that as of the end of 2003 it had sold 13.7 million Xbox consoles worldwide, keeping it in a tight race with Nintendo GameCube for second place in the console market, and plans to have sold between 14.5 million and 16 million by the end of its fiscal year in June.

Overall, Microsoft, which makes most of its money through sales of its Windows operating system and Office software suite, saw a 19% increase in revenue in the quarter to $10.15 billion, while net income was down 17% to $1.55 billion.

Microsoft shares were down 1% to $28.01 Thursday before earnings were announced.

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