Microsoft hit with first ever quarterly loss

Microsoft

(AP) REDMOND, Wash. - Microsoft (MSFT) 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 $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 April-June quarter, or 6 cents a share. That compares with earnings of $5.9 billion, or 69 cents, a year ago.

Revenue rose 4 percent to $18.06 billion.

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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 percent, at $31.32 in after-hours trading following the release of earnings results.

Microsoft, which is based in Redmond, Washington, 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.

With Windows 8-powered devices still a few months away, some prospective PC buyers have been postponing their purchases so they can buy the latest technology from Microsoft this fall. That's contributed to a slowdown in PC sales, and revenue in Microsoft's Windows division has now dropped in five of the past seven quarters.

The pressure won't be on Microsoft until Windows 8 is released on Oct. 26. Investors will then be closely watching to see if the new operating system delivers on its goal of making Microsoft a significant player in the rapidly growing tablet computer market currently dominated by Apple Inc.'s iPad, while also helping boost PC sales.

The high hopes for Windows 8 are the main reason Microsoft's stock has climbed about 18 percent this year as of Thursday's closing price of $30.67.

[parisdakar]

That's a shame.

[askagain]

Anyone in business knows that some years are better than others. A bad year for Microsoft does not mean Microsoft is on the decline. In my business, profits vary from year to year. A slow year can be followed by a record year and vice versa. Like it or not, we still live in a Microsoft world. From my experience, Windows 7 is terrific and Windows 8 may surpass Windows 7. Of course, as we've seen, products such as the Apple Ipad can quickly change the landscape. As good as the Ipad is, power users will always need operating systems such as those produced by Microsoft.

[hypnotoad72]

There will be layoffs and migration of duties and work (to other people and/or countries). Just like when they were successful.

The downward spiral won't be halting for some time...

Win7 is okay, but it's not a panacea. People who've tested it at work have not been thrilled with it, and they are IT people... I'll listen to what they say instead of any joe schmoe end user who has no concept of technical details...

Oh, Microsoft has no monopoly on higher performing, operating systems never mind the real power comes from a tightly-written OS combined with faster hardware. Your blissful mixing of "power users will always need operating systems such as..." only shows some ignorance on your part.

[askagain]

hypnotoad72 - As a computer user since 1982 and a person who uses computers in business on a daily basis, I do speak from some knowledge. Microsoft still dominates the computer word. That is not to say that there aren't other good operating systems out there. Further, tablets such as the Ipad simply are not enough for businesses and others that require speed and power. For example, our graphic artist could not do her work for us on an Ipad. My son who only needs something for email and browsing the internet, gets on nicely with his Ipad. Finally, we are all entitled to our opinions. A person expressing an opinion that you don't agree with doesn't just make that person ignorant.

[Resin-Smoker]

QQ

[rwsmith29456]

MS should adopt practices known to work in the past, i.e. sell products that need continuous fixes right out of the box. They made a mistake releasing Win 7 because it is too trouble free. Win 8 should get them back on track.

[AVoiceofR3ason]

As a graphic design agency we run both Macs and Windows equipment. I can say in all honesty, Window machines are very difficult to maintain, operate and keep virus free. The interface is non-intutive (go to start to shut down?) and the O/S structure is a recipe for a yearly rebuild.

I'm all for competition and wish MS the best, but unless they get their act together they can expect more quarterly losses.

[hypnotoad72]

Having used multiple platforms myself, you're right. Macs are easier to maintain - the lack of a fragmentation-prone file system and an OS that does not have a bass-ackwards "registry" both have led to continuing problems with Windows. Win7 does provide some interesting workarounds, but I suspect most of those are band-aids. Even the "disabling" of secondary screens on multiple monitor systems doesn't work right (screen is made to look black but the 'power save' mode on the monitor is not activated - the power light still being green. It's repeated on a number of disparate workstations and of many different brands, so it's a bug. It won't be fixed either. MS has a habit of telling people to upgrade to a new system, even when the economy is in bleep-shape. Win NT 4, after SP6, had people upset when MS dropped the ball on them... Still, MS wants to profit - being ethical or actually helping the customer won't make Microsoft rich.

[Jaylah54200]

I personally, don't know anybody that's ever bought a stand-alone copy of either Windows or Office. Not at those prices!!!

Most folks just wait until their current computer is outdated, and then -- when they buy another one -- the "upgrade" their OS, etc., simply because it comes preloaded on their new computer.

[pwgrant]

I have jumped to Linux Mint and have NEVER looked back. Sayonara!! Even running on 5 year old Celeron laptop, Mint is superior in speed and stability. With Wine, there literally is NOTHING I have not been able to do. W8 will be a disaster.

[baileycccc]

I can't wait to get my on hands the 3rd version of the "Surface" tablet. If there is anything I know for sure, "Microsoft is World Renowned" for getting it right the third time around.

[Jaylah54200]

No kidding. I'm always at least one Windows version behind and encouraged my clients to do the same.

Let fools do MS's beta-testing for them.

As to tablets, I'm still waiting. That technology is still progressing at lightening speed, and I don't want to buy one just to have it totally outdated 6 months from now.

[-TeaPartyNation--]

Microsoft hit with first ever quarterly loss
... "If You've Got a Business — You Didn't Build That. Somebody Else Made That Happen." - Barack Hussein Obama, 16 July 2012

OMG - for the FIRST time ever, OBOZO is right - it's HIS failed policies that made micro$oft post a loss.

[Jaylah54200]

How do you figure. It seems to me that it was a bad business decision (buying aQuantive) that lead to the drop in value.

You think Obama is running Microsoft now?

[hypnotoad72]

I'm sure their cloud subscription plans will save them as our New Normal Contracting Economy (the NNCE) continues.

Desktop operating systems' licensing only goes so far, and as more companies go under thanks to this economy, fewer will have dedicated servers and I don't think too many companies (small or large) really trust others with sensitive data despite the allure of "low cost" subscription fees...

[hypnotoad72]

I'm sure a little more corporate welfare won't hurt:

http://www.ctj.org/html/corp0402.htm

http://www.mydd.com/story/2007/2/7/184312/5388