Microsoft Announces First-Ever Quarterly Loss
July 20, 2012

Microsoft Announces First-Ever Quarterly Loss

redOrbit Staff & Wire Reports - Your Universe Online

Microsoft, the Redmond, Washington-based tech giant founded by Bill Gates, announced Thursday that they had experienced their first quarterly loss in more than a quarter century as a public company.

According to Ryan Nakashima of the Associated Press (AP), the loss is due to an accounting adjustment related to their 2007 purchase of online advertising firm aQuantive (now Microsoft Advertising). Nakashima said that the company, which was purchased by Microsoft for $6.3 billion, "hasn't yielded the returns envisioned by management."

"The company reported a fourth quarter loss of 6 cents a share on revenue of $18.06 billion," ZDNet's Larry Dignan explained, adding that, along with the "goodwill impairment charge" linked to the aQuantive acquisition, the loss also includes "deferred revenue of $540 million due to Windows upgrade offers."

With those items excluded, the firm reported non-GAAP earnings of 73 cents per share on revenue of $18.6 billion (a 4% increase), according to Dignan and Nakashima. Those numbers were below Wall Street's projected fourth-quarter earnings of 62 cents a share on revenue of $18.12 billion, and resulted in a $492 million loss (or 6 cents per share) in the period from April through June. During the same quarter the previous year, Microsoft reported earnings of $5.9 billion, or 69 cents per share, according to various reports.

The unearned revenue reported during the fourth-quarter, which Bloomberg writer Dina Bass calls "a yardstick of future sales," was $20.1 billion. That was well over analyst's average prediction of $19.4 billion, she said, and without the writedown, the company would have turned a 67 cent-per-share profit. All things considered, Bass suggests that the figures were "a sign that the largest software maker will benefit from corporate demand for its programs."

For the fiscal year 2012, Microsoft reported earnings of $2 per share on total revenue of $73.7 billion, Dignan said. Furthermore, in a statement, Microsoft CEO Steve Ballmer said that the next year would be the "most exciting launch season" in Microsoft history, referring to the forthcoming releases of Windows 8 and Office 2013, as well as the company's first foray into the tablet computer market, the Surface.

"Microsoft's fortunes are tied to the October release of Windows 8, the most extreme redesign of the company's flagship operating system since 1995," Nakashima claims. "Windows 8 will feature a new look that will show applications in a mosaic of tiles and boast new technology that will enable the operating system to work on touch-controlled tablet computers, as well as its traditional stronghold on desktop and laptop computers."

"Microsoft's continued strength in sales of its Office suite of products to corporate customers has helped cushion the company from the impact of slumping personal computer sales," added the Wall Street Journal. "The company earlier this week gave a preview of its new Office software that embraces cloud computing and mobile devices in an effort to revitalize its core software offering for global business."