Microsoft reports first quarterly loss as public company
Microsoft
said Thursday that an accounting adjustment to reflect a weak online ad business led to its first quarterly loss in its 26 years as a public company.
The software company had warned that it was taking a US$6.2-billion charge because its 2007 purchase of online ad service aQuantive hasn’t yielded the returns envisioned by management.
The non-cash adjustment is something companies do when the value of their assets decline. Microsoft Corp. paid $6.3 billion for aQuantive, only to see rival Google Inc. expand its share of the online ad market.
The charge led to a $492-million loss in the AprilJune quarter, or six cents a share. That compares with earnings of $5.9 billion, or 69 cents, a year ago. Revenue rose four per cent to $18.06 billion. Excluding the adjustment and the deferral of some revenue into the current quarter related to its launch of Windows 8, earnings came to 73 cents per share, beating the 62 cents per share expected by analysts polled by FactSet.
Although the earnings were higher than expected, analysts were looking for higher revenue at $18.15 billion.
Shares were up 65 cents, or 2.1 per cent, at $31.32 in after-hours trading following the release of earnings results.
Microsoft, which is based in Redmond, Wash., has never previously reported a quarterly loss since the company’s initial public offering in March 1986. The aQuantive-driven setback isn’t likely to faze investors, who usually focus on what lies ahead for a company instead of dwelling on past mistakes.
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. 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. In conjunction with Windows 8, Microsoft is planning to release its own tablet, the Surface.
A revamped version of another lucrative franchise, Microsoft’s Office software that bundles word processing, spreadsheet and email programs, is also in the works. Earlier this week, Microsoft previewed how the next version of Office, expected to be released next year, will work on tablet computers running on Windows 8.