Microsoft suffers first ever loss

 

Microsoft posted its first quarterly loss in its 26 years as a public company as it declared a struggling online ad business a bust and prepared for one of the biggest product updates in its history.

The software giant had warned two weeks ago that it would take a $6.2bn (£3.9bn) charge in the April-June quarter because its 2007 purchase of online ad service aQuantive failed to help it compete with Google. The amount reflected the bulk of the $6.3bn (£4bn) acquisition cost.

The online ad business remains just a tiny part of Microsoft - comprising just 4% of its annual revenue. Most of the company's sales come from its Office suite of productivity software, Windows operating system and, increasingly, computer servers.

Upbeat business software and server sales in the quarter helped offset a flat market for personal computers, which had put a damper on Windows sales. Take as a whole, the software giant's results beat analyst expectations.

Shares rose 2.4% to $31.39 in after-hours trading following the earnings announcement.

Including the big write-down on aQuantive, Microsoft booked a $492m (£313m) loss in the fiscal fourth quarter, or 6 cents a share. That compares with earnings of $5.9bn (£3.7bn), or 69 cents, a year ago.

Revenue rose 4 % to $18.06bn (£11.5bn).

Excluding the adjustment and the deferral of some revenue related to its upcoming Windows 8 operating system, earnings came to 73 cents per share.

Analysts polled by FactSet were looking for 62 cents per share of earnings on revenue of $18.15bn.

"The quarter was pretty much in line across major segments of the business," Nomura analyst Rick Sherlund said.

Microsoft's fortunes are now tied to the October 26 release of Windows 8, the most extreme redesign of the company's flagship operating system since 1995.

Windows 8 will feature a new look and boast new technology that will enable the operating system to work on touch-controlled tablet computers, as well as Microsoft's traditional stronghold of desktop and laptop computers.

In conjunction with Windows 8, Microsoft is planning to release its own tablet, the Surface.

A revamped version of Office, which bundles word processing, spreadsheet and email programmes, is also in the works.

Yesterday's loss was the first for Redmond, Washington-based Microsofit since the company went public in March 1986.

The $6.2bn charge is a non-cash adjustment, which companies do when the value of their assets decline. Firms have to review their assets once a year, and the just-ended quarter is Microsoft's final one for fiscal 2012.

AQuantive was Microsoft's most expensive purchase at the time and was supposed to help it mount a more serious challenge to Google in online ads.

But the online ad division continued to post losses - totaling more than $9bn (£5.7bn) since the purchase, not including the charge.

By contrast, Google has widened its lead, thanks in part to its purchase of DoubleClick for $3.2bn (£2bn) about eight months after the aQuantive deal.

Google's search engine, a major vehicle for selling ads, has remained strong, while Microsoft's Bing search engine saw its market share drop slightly to 26%, from 27% a year ago. That includes searches through Yahoo, which has been using Microsoft's search technology for nearly two years.

Google earned $2.8bn (£1.7bn), or $8.42 per share, during the three months ending in June. That compared with net income of $2.5bn, or 7.68 per share, last year.

Revenue climbed 35% from last year to $12.2bn (£7.7bn).

Start your day with The Independent, sign up for daily news emails
Sport
footballHe started just four months ago
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect