Microsoft posted a net loss of $492 million, or a loss of $0.06 per share, this quarter compared to the net income of $5.87 billion it had in the same quarter of last year.
The company’s loss mostly resulted from the $540 million in revenue deferred from a planned Windows 8 upgrade program, and a charge of $6.19 billion for the “impairment of goodwill” on its online services division.
From the dictionary of finance, goodwill is the established reputation of a business regarded as a quantifiable asset — most often represented by the excess of the price paid at a takeover for a company over its fair market value. Impairment of goodwill is when the company has lost money because the value of the goodwill of a business unit declines to an amount less than the carrying value of the goodwill on the company’s books.
In Microsoft’s case, its acquisition of the dud of an online advertising company aQuanitative — which it paid a hefty premium for in 2007 — resulted in the impairment of goodwill this quarter. Microsoft noted of this company that the “expectations for future growth and profitability are lower than previous estimates.”
Microsoft’s Windows unit continued a pattern of decline that started five quarters ago, falling 13% to $4.15 billion.
While Microsoft did post a quarterly loss, it did bring in higher than expected revenue through an overall 7% rise in fourth quarter sales — mostly in its Office and Server divisions — that beat the expectations of most analysts.
Considering the summer of silicon discontent, Microsoft’s performance isn’t spectacular but compared to its peers it isn’t poor either.
Colin Gillis, an analyst at BGC Partners LP, painted a rather sanguine view of Microsoft’s situation when he spoke to Bloomberg recently.
“Let’s be honest, it wasn’t the highest bar for them this quarter because of the poor macroeconomic environment and the PC market,” Mr. Gillis said. “People weren’t expecting that much.”
J.P Morgan had the same opinion.
“Over recent years, Microsoft has demonstrated that it can manage its operations appropriately and this quarter was a good example of that,” said a note by J.P Morgan’s securities analysts.