Should Microsoft Reconsider Its Search Efforts?

Microsoft’s (s msft) earnings announcement and its unprecedented decision to cut around 5,000 employees has dominated the news today. Experts have already weighed in on the reasons and the ramifications (Mary-Jo Foley, for example, has information about which divisions might see job cuts). As the company tries to get its act together, one question comes to mind: Should it give up on its search and online advertising efforts? The division brought in $866 million in revenues but lost $471 million.

As Allan B. Krans, senior analyst with Technology Business Research, points out, the Online Services Group has lost a cumulative total of $3.1 billion over the past three years; losses in calendar year 2008 amounting to a whopping $1.6 billion “with more than 50 percent operating losses being reported in each of the past three quarters,” he notes today. Krans is right to point out that the large-scale transitions to cloud computing and SaaS will impact Microsoft’s business, and that it means it’s time for the company to rethink “the concerted focus on challenging Google (s goog) in the search and advertising business should at least draw a second look in light of the current business climate.”

I kinda side with Allan on this one. After all, why does Microsoft need to chase the proverbial rabbit (aka online advertising) down the hole, instead of refocusing its energies on what it knows best and expanding those markets? OK, now let’s debate about this.

Photo via Flickr courtesy of Nick, Progammerman.