Microsoft’s First Loss

Microsoft recently reported a $492 million loss for its 4th quarter ending June 30. The loss is inclusive of a previously announced $6.19 billion write down for its ailing online services division. This loss is considered as Microsoft’s first ever loss as a public company in its 26 year history.

Microsoft’s online services division’s current poor performance is attributed to Microsoft’s acquisition of digital ad agency aQuantive five years ago. Additionally, Microsoft also deferred $540 million for its Windows Upgrade offer, which currently offers steep discounts to people who are willing to upgrade to their upcoming OS from a previous one.

It’s not all about losses, though, as Microsoft has also posted a non-GAAP revenue amounting to $18.60 billion, an operating income of $6.93 B and earnings of 73 cents per share.

Microsoft CFO Peter Klein tried to rally the troops in a recent earnings call, with Klein touting the upcoming Windows 8 release on October, as well as their future online offerings. While the CFO boasted of a growing share and revenue per search, he admitted that Microsoft’s expected future growth and profitability may be lower than what everyone initially expected.

Klein emphasized that search still remains a strategic asset and a priority for the company, which is a big reason why the company bought aQuantive – which is their counter to rival Google’s earlier acquisition of the ad agency Double Click.

Other items included in MS’s earnings release:

• Both Windows Server and SQL Server grew 13 percent for the quarter, and 12 percent for the full year
• Microsoft’s Business division dropped by 7 percent for the quarter, and 7 percent for the whole year
• Windows Live Division suffered a 13 percent drop in revenue for the fourth quarter
• The Entertainment and Devices Division, which is home to Xbox and Kinect, managed to grow by 20 percent for the fourth quarter and 8 percent for the fiscal year