Microsoft Posts First Ever Loss, But Don’t Get Excited

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ZOMG! Harness up your Schadenfreude, and let it run wild and free, because Microsoft has posted its first ever loss! Isn’t that awesome! Finally, Microsoft has some comeuppance, and…wait, what? It’s just because of a one-time charge, and the company actually posted record revenue and is more or less doing just fine?

In a word, yes.

Steve Ballmer

Microsoft CEO Steve Ballmer Laughs at Red Ink!

Big Redmond reported results for its June quarter, the company’s fourth fiscal quarter. Those results included record quarterly revenue of US$18.06 billion, with a loss of $192 million.

It’s that loss that has grabbed all the headlines, as it is Microsoft’s first-ever loss as a public company. With the company’s image as a plodding dinosaur that has hopelessly lost the war for cool to Google and Apple, many people seem to be jumping at the opportunity to assume that the loss is finally the proof that the company’s heyday is long past.

That may or may not be the case, but this quarterly result won’t be Steve Ballmer’s death knell as Microsoft CEO. While it is the company’s first loss, it was due to a one-time charge—Microsoft wrote off $6.19 billion in so-called good will related to the 2007 purchase of aQuantive.

aQuantive was an advertising company that Big Redmond bought for $6.3 billion back when there was a vague chance that Google wasn’t going to WTFPWN the online advertising market. It turns out that an aQuantive-armed Microsoft wasn’t the combination to keep Google from doing just that, and the charge was a necessary step in adjusting the value of those assets today.

As it is, Microsoft is making money hand-over-first. In addition to the $6.2 billion charge mentioned above, Microsoft also deferred $540 million of revenue related to the company’s Windows Upgrade Offer. Add those numbers and some other minor charges, and Microsoft’s non-GAAP earnings clocked in at $6.94 billion, 12 percent higher than the $6.2 billion in earnings in the year-ago quarter.

The company also reported record revenue for fiscal 2012 of $73.72 billion, including earning of $21.76 billion and earnings per share of $2.00.

The write down does call into question Microsoft’s future in online advertising, which could lead to questions of Bing’s relevance and future, but the reality is that Microsoft’s Windows and Office empires are still more than strong enough to make up for the company’s many other weaknesses in search, online advertising, and possibly smartphones, at least in the short term.

Shares in MSFT ended the day higher at $30.665, up $0.215 (+0.71 percent), on strong volume of 46.6 million shares trading hands. Shares were up in after hours trading, too, at $31.40, up $0.735 (+2.40 percent).

Image made with help and help from Shutterstock.

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8 Comments Leave Your Own

RonMacGuy

Great graphic, Bryan!!

mrmwebmax

+

Agreed. Awesome graphic! (As per usual.)

Bryan Chaffin

Thanks, though I’m not sure I be encouraged after this one. smile

palenoue

Can we use the term “beleaguered” now?

Aftermac

Microsoft Death Knell #1… maybe not, but it’s close enough for me. :D

eolake

Dangit, couldn’t you have let me enjoy the shadenfreude at least until I’d clicked on the article?!

How do they keep *doing* that? They haven’t introduced anything relevant since the second millennium, and even that is arguing that they they did do that, then.

If that makes me hateful and envious, well, hmmprrhmph! I’ll just go watch my Steve Ballmer monkeyboy dance video again.

Lee Dronick

Eolake, I suppose that they are still selling a lot MicroSoft Office and Windows is still the dominate OS

wab95

Agreed, great graphic, Bryan. A chair in hand is always optional.

If ever a situation merited Mark Twain’s oft-cited quote, “Rumours of my death have been greatly exaggerated”, it is this one; and you are right to point this out. MS’s success in the 1990’s and early naughties have imparted to it an inertia that a small planet might envy, and one that will likely see it safely through the remainder of the decade, even if not as the unstoppable force it once was. MS’s desktop, office suite and server system instal base in enterprise, and the prohibitive cost to enterprise in precipitously divesting of that infrastructure, alone, effectively guarantee a hearty revenue stream, even as the world, carrying enterprise with it, relentlessly moves forward into a post-PC era.

If anything, that revenue stream is largely responsible for making MS’s business plan, with its frenetic and aborted ventures and forays, a model of sustainable inefficiency. It literally can afford, in the short to medium term, to blow a few billion. So long as such losses do not exceed that phenomenal revenue, no worries; and it only needs to get an occasional success to stay in the black.

Therein lies the threat to the longterm. Whither the modern success, MS?

Well might Hamlet ask,

“To be, or not to be, that is the question: Whether ‘tis nobler in the mind to suffer the slings and arrows of outrageous Fortune [i.e. Windows and Office],

“Or to take arms against a sea tablets, and by opposing them, to die, to sleep, no more; and by a sleep, to say we end the heart-ache, and the thousand natural shocks that Windows 8 is heir to?...”

Might I humbly suggest - nay request - that you, and your fellow bard (one @jgamet) take up the theme, along with the broader one of tablet turf tussles and related tidbits, like Ballmer’s gallant gauntlet to Apple, in an upcoming exciting episode of ACM?

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