Microsoft charges lead to first-ever loss

Here’s a headline: For its fourth quarter ending June 30, Microsoft reported a loss of $492 million (six cents per share), compared to a profit of $5.87 billion (69 cents per share) for the year ago quarter. This was Microsoft’s first loss in its 26 year history as a public company,
The loss factors in a whopping $6.19 billion write down Microsoft announced two weeks ago on its struggling online services division. That charge dealt with Microsoft’s acquisition five years ago of aQuantive, a digital ad agency. And, as its usual practice, the company also deferred $540 million related to its Windows Upgrade offer. The new Windows version is due later this year.
Excluding all that, Microsoft posted non-GAAP revenue of $18.60 billion (up 7 percent year over year), operating income of $6.93 billion (up 12 percent YOY), and earnings of 73 cents per share (up 6 percent YOY.)
On the earnings call Thursday afternoon, CFO Peter Klein did his best to rally the troops, playing up the company’s anticipated release of Windows 8 in October. And, in the sensitive area of online services, he said Microsoft continues to grow share and revenue per search but acknowledged that Microsoft’s “expectations for future growth and profitability are lower than we previously expected.”
Klein reiterated that search, despite all the agita, remains “a strategic asset,” a priority, for the company. Microsoft bought aQuantive to counter rival Google’s earlier acquisition of DoubleClick, another online ad agency.

Here are other top items from the earnings release:

  • The Server & Tools business — including Windows Server and SQL Server grew 13 percent for the quarter, and 12 percent for full year.
  • Microsoft Business Division — which includes cash cow Office, fell 7 percent for the quarter and 7 percent for the year.
  • Revenue for the Windows & Windows Live Division — home of X-box and Kinect-– fell 13 percent for the fourth quarter and 3 percent for the full year.
  • Online Services Division revenue grew 8 percent for the fourth quarter and 10 percent for the full year, growth the company attributed to a growing Bing search business.
  • Revenue from the Entertainment and Devices Division — home of Xbox and Kinect — grew 20 percent for the fourth quarter and 8 percent for the fiscal year.