Microsoft posted its first quarterly loss in its 26 years as a public company on Thursday as it declared a struggling online ad business a bust and prepared for one of the biggest product updates in its history.
The software company had warned two weeks ago that it would take a $6.2 billion charge in the April-June quarter because its 2007 purchase of online ad service aQuantive failed to help it compete with Google. The amount reflected the bulk of the $6.3 billion acquisition cost.
The online ad business remains just a tiny part of Microsoft – comprising just 4% of its annual revenue. Most of the company’s sales come from its Office suite of productivity software, Windows operating system and, increasingly, computer servers.
Upbeat business software and server sales in the quarter helped offset a flat market for personal computers, which had put a damper on Windows sales. Taken as a whole, the software giant’s results beat analyst expectations.
Shares rose 2.4% to $31.39 in after-hours trading following the earnings announcement.
Including the big write-down on aQuantive, Microsoft booked a $492 million loss in the fiscal fourth quarter, or 6 cents a share. That compares with earnings of $5.9 billion, or 69 cents, a year ago.
Revenue rose 4% to $18.06 billion.
Excluding the adjustment and the deferral of some revenue related to its upcoming Windows 8 operating system, earnings came to 73 cents per share.
Thursday’s loss was the first for Redmond, Wash.-based Microsofit since the company went public in March 1986.
The $6.2 billion charge is a non-cash adjustment, which companies do when the value of their assets decline. Companies have to review their assets once a year, and the just-ended quarter is Microsoft’s final one for fiscal 2012.
AQuantive was Microsoft’s most expensive purchase at the time, and was supposed to help it mount a more serious challenge to Google in online ads.
But the online ad division continued to post losses – totalling more than $9 billion since the purchase, not including the charge.
By contrast, Google has widened its lead, thanks in part to its purchase of DoubleClick for $3.2 billion about eight months after the aQuantive deal.
Google’s search engine, a major vehicle for selling ads, has remained strong, while Microsoft’s Bing search engine saw its market share drop slightly to 26%, from 27% a year ago. That includes searches through Yahoo, which has been using Microsoft’s search technology for nearly two years.
