The woes continue for Microsoft’s beleaguered online services division, which includes the company’s ad sales operation – it has posted an operating loss of $480m, nearly twice as much the $267m loss it made a year ago.

Due to forecasts of a difficult ad environment, the company has cuts its year-end projections. Microsoft now expects the divisions growth to be 10% in 2009, compared to the 18 percent it predicated last quarter.

Microsoft also announced that it would cut back on hiring in 2009, and look to spend less on travel expenses and data centres.

Overall Microsoft remained buoyant thanks to the stability of its Windows client, server and office businesses, but chief financial officer Chris Liddell warned the challenging economic environment will cut growth predictions for 2009.

“What we’ve done is essentially gone right across the company, every division, and looked for areas where we would like to spend less,” indicates Liddell.

The divisions revenue grew 15% to $770m, generated from its Live search and MSN display ad networks, with search growth exceeding display. This figures surpassed Microsoft’s own expectations, which were banking on projections of $718m.

Overall revenues climbed 9% to $15bn while profits rose just 1.9% to $4.3bn.

The company will trim expenses next year, looking to shave $500m in total, cutting back in a number of areas including marketing.

The company’s recent ad spend was the inspiration for a new Apple TVC that ridiculed the firm for spending $300m on its ‘I am a PC’ ads.

And the war rages on…