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10-Q Watch: Windows Mobile Helps Swing Microsoft's E & D Unit To A Loss

This story was written by Joseph Tartakoff.
Missing from Microsoft's third quarter earnings call Thursday: Any new details on Windows Mobile. Executives mentioned the platform only three times, reemphasizing that Windows Mobile 6.5 was due out later this year. No numbers were given out on license sales.

Contrast that with Apple's earnings call this week, where executives harped the iPhone's continued success, as well as the forthcoming iPhone 3.0.

Windows Mobile did, however, have an effect on Microsoft's bottom line. Microsoft (NSDQ: MSFT) blamed heavy spending on Windows Mobile in part for ending a streak of three consecutive quarters of operating profit in the company's entertainment and devices unit. The division posted a $31 million loss, compared to a $106 million operating profit during the same period a year ago. From Microsoft's 10-Q:  "Research and development expenses increased $66 million or 18%, primarily reflecting increased headcount-related expenses associated with the Windows Mobile device platform." The company also attributed a 55 percent drop in operating profit in the unit over the last nine months, in part to "headcount-related expenses associated with the Windows Mobile device platform, driven by recent acquisitions."

Microsoft's most significant recent Windows Mobile-related acquisition was Danger, which it acquired for $500 million last February. All About Microsoft's Mary Jo Foley has said that Danger staffers now at Microsoft are working on a set of new mobile servicesand perhaps even hardwarewhich will likely debut with the release of Windows Mobile 7. But during the earnings call, nobody talked about that eithera poignant reminder of howdespite the hypethe Windows Mobile business is easily lost among Microsoft's myriad businesses.

By Joseph Tartakoff

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