Microsoft absorbs $6.2 billion for aQuantive acquisition flop

Microsoft is absorbing a $6.2-billion charge to reflect that one of the biggest deals in its 37-year history turned out to be a dud. The non-cash charge announced Monday could saddle Microsoft with a loss for its fiscal fourth quarter ended in June. Analysts polled by FactSet had predicted Microsoft would earn about $5.3 billion […]

Microsoft is absorbing a $6.2-billion charge to reflect that one of the biggest deals in its 37-year history turned out to be a dud.

The non-cash charge announced Monday could saddle Microsoft with a loss for its fiscal fourth quarter ended in June. Analysts polled by FactSet had predicted Microsoft would earn about $5.3 billion for the period.

Microsoft, which is based in Redmond, Wash., is scheduled to release its latest quarterly results on July 19.

The world’s largest software maker blamed the setback on the disappointing performance of aQuantive — an online advertising service that Microsoft bought for $6.3 billion in 2007 to mount a more serious challenge to one of its biggest rivals, internet search leader Google.

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.

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.

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 has sustained losses totalling nearly $9 billion since the company bought aQuantive. The online division generated $2.5 billion in revenue during Microsoft’s fiscal 2011, just $54 million more than in fiscal 2007.

Although the online division has been faring slightly better in the past year, “the company’s expectations for future growth and profitability are lower than previous estimates,” Microsoft said in a statement.

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. 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.

Media Articles

30 Under 30 is back with a new name, new outlook

No more age limit! The New Establishment brings 30 Under 30 in a new direction, starting with media professionals.

As Prime Minister, Kellie Leitch would scrap CBC

Tory leadership hopefuls are outlining their views on national broadcaster's future

‘Your Morning’ embarks on first travel partnership

Sponsored giveaway supported by social posts directed at female-skewing audience

KitchenAid embraces social for breast cancer campaign

Annual charitable campaign taps influencers and the social web for the first time

Netflix debates contributions with Canadian Heritage

Netflix remains wary of regulation as some tout 'Anne' and 'Alias Grace' partnerships

Canadians warm up to social commerce

PayPal and Ipsos research shows "Shop Now" buttons are gaining traction

Online ad exchange AppNexus cuts off Breitbart

Popular online ad exchange bans site for violating hate speech policy

Robert Jenkyn is back at Media Experts

Former Microsoft and Globe and Mail exec returns to the agency world

2016 Media Innovation Awards: The complete winners list

All the winning agencies from media's biggest night out!