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Microsoft's Server And Tools Unit Swings To A Loss

Microsoft on Friday reported that its server and tools business swung to a $204 million operating loss in the December quarter, due to stock-based compensation costs and an increase in payroll expenses.
The Redmond, Wash., software maker said in its quarterly filing with the Securities and Exchange Commission that the loss compared to a $234 million profit during the same quarter in 2002.

The loss occurred despite an increase in revenue for the unit, which includes Windows server and other server products, and development tools. Revenue for the fiscal second quarter ended Dec. 31 increased to $2.1 billion from $1.8 billion.

"Server and Tools operating income for the first six months of fiscal 2004 decreased to $166 million compared to $526 million in the prior year primarily due to the stock-based compensation costs from the employee stock option transfer program in the second quarter of fiscal 2004 and an 11 percent increase in operating expenses including headcount-related costs," Microsoft said in the SEC filing.

During its quarterly earnings announcements, Microsoft releases sales for its business units, but doesn't release profit and loss for each segment until its formal SEC filing.

For its business solutions unit, which represents Microsoft's multi-billion-dollar investment in the small and midsize business applications market, the company reported a narrower loss of $69 million, compared to a loss of $87 million the previous year. Revenue increased to $190 million from $135 million.

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