Microsoft to take accounting charge of $6.2B

Microsoft CEO Steve Ballmer (Credit: Justin Sullivan/Getty Images, file)

(CBS/AP) REDMOND, Wash. - Microsoft Corp. (MSFT) is absorbing a $6.2 billion charge to reflect its inability to produce more revenue from an online ad service that it bought nearly five years ago.

The Redmond, Wash.-based company announced in a statement Monday that the non-cash accounting write down is mostly related to its 2007 acquisition of aQuantive. Since it purchased the online advertising business, Microsoft's online division has sustained losses totaling nearly $9 billion.

The aQuantive deal ranked as the most expensive deal in Microsoft's history until it was eclipsed last year by the company's $8.5 billion purchase of Internet video chat service Skype.

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Investors can only hope Skype works out better than aQuantive.

Microsoft's $6.2 billion charge represents a sobering acknowledgement that aQuantive didn't bring in as much online advertising revenue as envisioned, forcing management to write off most of the purchase price.

"While the Online Services Division business has been improving, the company's expectations for future growth and profitability are lower than previous estimates," the company said in a statement.

The write down could saddle Microsoft Corp. for its fiscal fourth quarter ending in June. Analysts polled by FactSet had predicted Microsoft would earn about $5.3 billion for the period. Microsoft is scheduled to release its latest quarterly results on July 19.

"Microsoft does not expect this accounting write down to affect its ongoing business or financial performance," the company said.

To add to Microsoft's mortification, Google has been milking the acquisition of an aQuantive rival to widen its lead in the steadily growing online ad market. Google bought DoubleClick for $3.2 billion about eight months after Microsoft took control of aQuantive.

Since then, Google's annual profit and advertising sales have more than doubled. Last year, Google earned $9.7 billion and collected $36.5 billion in ad revenue.

Microsoft's online division generated $2.5 billion in revenue during Microsoft's fiscal 2011, just $54 million more than in fiscal 2007.

Bing, a search engine that Microsoft unveiled four years ago, has been getting more usage, but most of its gains have come at the expense of a business partner, Yahoo Inc. Microsoft's search technology has been powering searches on Yahoo's website for nearly two years, but that alliance has barely dented Google's market share.

BGP Financial Partners analyst Colin Gillis doesn't expect the hefty charge to dampen investors' enthusiasm as the anticipation builds for the upcoming release of Microsoft's latest version of the Windows operating system that remains the company's biggest moneymaker. The revisions in Windows 8, expected to hit the market this fall, are being counted on to help revive personal computer sales and establish Microsoft as a major player in the tablet computer market.

"AQuantive didn't work out, but everyone already pretty much knew that," Gillis said. "Now, they are just mopping up."

Microsoft shares shed 13 cents to $30.43 in Monday's extended trading. At that level, Microsoft's stock price has still posted a 17 percent gain so far this year.