Ouch! Microsoft makes first loss in 26 years

A humiliating $6.2bn write down means the firm has made a $492m Q4 loss, the first since it floated in 1986.

by Michael Northcott
Last Updated: 19 Aug 2013

By comparison, last year’s Q4 result was a $5.9bn profit. And what a way for the Redmond giant’s spotless record to be felled, an accounting adjustment due to the revaluing of an asset. Albeit a pretty substantial one. The exceptional $6.2bn charge has been taken against Microsoft’s online advertising division, which has, ahem, failed to ‘accelerate growth to the degree anticipated’ since MS bought into online ads with the purchase of aQuantive back in 2007.  

The idea in those heady pre-lapsarian days was that aQuantive would give Microsoft the horsepower it needed to take on Google in the lucrative world of online advertising. Sadly it was not to be so - the business (which also includes MS’s Bing search engine) has been losing money consistently. Today’s write down wipes all but $100m of the $6.3bn Microsoft paid for aQuantive off the balance sheet. Meanwhile Google latest results show it is storming ahead.  

Elsewhere the news was better however. Underlying revenues hit a record $18.9bn, thanks to strong demand for its services and products from the business sector.  This despite slow spending from consumers, most of whom will be waiting for the raft of new product launches planned for next year before parting with their hard-earned. 

 Its coming financial year promises to be a busy one on that front, with the planned arrival of no fewer than four big new products - Windows 8, Windows Phone 8, Windows Server 2012 and Office Productivity Suite 2013.  

Of these the Windows 8 pair will be crucial - it will usher in a complete new look (the kind of change that is not always popular with users) as well as a host of technical upgrades - the firm has described it as the biggest shake up to its dominant PC OS in a decade. It has even deferred $540m of revenues expected on the back of the Windows 8 launch, to pay for a discounted $15 upgrade for Windows 7 users. The Windows 8 Phone meanwhile will offer yet another chance for Microsoft to finally get some traction in the crucial mobile market. 

Of course Microsoft bosses know that you can’t win ‘em all, but even so the aQuantive saga is a sorry one. They will no doubt be hoping that the $1.2bn the firm has just spent on Yammer won’t go the same way.  

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