The decision reportedly comes on the heels of a growing MSN deficit, $92 million to be exact, as reported in Microsoft's latest quarter, and the increasing belief that MSN is an effective online portal, but that its failure as an Internet Service Provider (ISP) has been too costly.
MSN was originally created in 1995 to eclipse AOL's control of the dial-up Internet market, although it was never able to compete with the Time Warner division and instead fell into a long line of similar, second-rate ISPs.
MSN also managed to transform itself into an online portal that attracted volumes of subscribers, but it was never able to even skim the surface of AOL's monopoly.
As the popularity of high-speed Internet access took hold, MSN began to slip even farther behind its competitor and failed to maintain necessary profit margins.
According to reports, even a $300 million marketing campaign last year couldn't save the division, and it soon lost an estimated 400,000 subscribers to other services.
Research firm IDC predicted earlier this year that Microsoft would eventually sell off its meager portion of the Internet market to another service provider, and in many ways, reports out of Redmond suggest a similar move.
While MSN will still keep one foot in the dial-up business, Microsoft intends to more directly target the riches of the broadband telecommunications industry.
According to Microsoft, it will divide MSN's communications services, which includes its dial-up and DSL services, Hotmail, Passport, and MSN Messenger, and MSN's information services, which includes the MSN portal, search functions, and ecommerce.
Microsoft has appointed Yusuf Mehdi to helm operations on the software side and Blake Irving as head of the communications side. Mehdi will also head up Microsoft's attempts to create an online music store and further its web search technology.
In September of this year, Microsoft shut down all of its unmoderated MSN chat rooms in 28 countries worldwide, including Europe, the Middle East, Africa, Asia, and parts of Latin America.
At the time, Microsoft said it was trying to curb the amount of illegal activity and adult content that circulated through those chat rooms. The company also stated that its decision was based on legal issues and a persistent drain on company resources.