Microsoft loses $1 billion a quarter on Bing...but it's only chump change

One might think that Microsoft would be concerned about its nearly $1 billion-a-quarter losses on Bing. The truth is, though, Microsoft is so profitable and sitting on so much cash that it can sustain that loss indefinitely. Why else would the company just announce a 25% boost in its dividends?

CNNMoney reports that Bing has lose $5.5 billion since its launch in June 2009, and continues to lose nearly $1 billion a quarter. It also says that ever since Microsoft began breaking out the finances of its online division in 2007, the division has lost a whopping $9 billion.

For most companies, that might mean it's time to press the panic button. Not for Microsoft, though. The company overall is so immensely profitable, and sitting on so much cash, that it can sustain those losses indefinitely.

Here's the latest evidence: Yesterday Microsoft announced a 25% boost in its quarterly dividend, to 20 cents a share. And that's on top of the 23% dividend boost from last year. A company worried about losing $1 billion a quarter doesn't hand out that kind of money to shareholders in such a short amount of time.

Microsoft can afford to pay such dividends not only because it's so profitable, but because it's sitting on so much cash --- $53 billion in cash and short-term investments, according to Reuters.

Of course, one might argue that Microsoft needs to increase its dividends, because its stock essentially hasn't risen for a decade --- ten years ago today the stock was priced at $24.855, and as I write this, it's priced at $26.16. It needs some way to attract investors, and like other mature companies past their high-growth phase, it needs to pay reasonable dividends.

But Microsoft hasn't given up on high growth. And that's one reason it's willing to lose nearly $1 billion a quarter on Bing, in the hopes it will eventually take off, and offer the kind of big growth that Google has gotten from the Internet.

Microsoft President of Online Services Qi Lu told a group of financial analysts last week that the path for Bing's profitability is not to "out-Google" Google, but instead change the way that people use search, according to CNNMoney. Rather than merely display links, he says, Bing will increasingly deliver directly usable content and services. As an example, he said that when you search for "Mariners tickets" on Bing, you'll get links to upcoming games where you can view maps of Seattle's Safeco Field that show ticket availability, by seat.

Will these types of features be enough to catch Google? Likely not. But they might be enough to ward off big losses, and bring in significant revenue. Even if that takes some time, Microsoft has enough of a war chest to keep investing for the indefinite future.