Microsoft Reports First Loss As Public Company

Microsoft reported its first quarterly loss as a public company Thursday after it took a previously announced $6.2 billion write-down for an online advertising company it acquired in 2007 and has not generated the business the company was hoping for.

On an earnings call with financial analysts, Microsoft executives also said the company has completed its $1.2 billion acquisition of Yammer, the developer of cloud-based social networking services for businesses.

In the fourth quarter ended June 30, Microsoft reported revenue of $18.1 billion, up 4 percent from $17.4 billion in the fourth quarter of fiscal 2011. The company reported a $492 million loss, due to the online advertising charge, compared to earnings of $5.9 billion in the same period one year earlier.

The reported revenue for the quarter was reduced by $540 million, deferred revenue related to the company's planned Windows 8 upgrade offer when the next-generation operating system begins shipping in October.

Looking beyond the charges, Microsoft executives touted the company's strong fourth-quarter performance.

"We started the fiscal year with good momentum and closed with a solid finish," said CFO Peter Klein on the conference call. "Throughout the year, we delivered top-line growth and remain disciplined on cost management."

"We delivered solid financial results while embarking on the largest [product] launch wave in our history," Klein said, referring to the significant number of new product introductions and product upgrades Microsoft has released in recent months, and will continue to release through the calendar year.

The $6.2 billion write-down was for "impairment of goodwill" -- the reduced value of assets Microsoft acquired when it bought aQuantive, an online advertising business, for $6.3 billion in 2007. Microsoft announced the planned write-down on July 2. The company is part of Microsoft's Online Services Division.

"While the Online Services Division business has been improving, the company's expectations for future growth and profitability are lower than previous estimates," Microsoft said on July 2, in its statement about the write-down."While the aQuantive acquisition continues to provide tools for Microsoft's online advertising efforts, the acquisition did not accelerate growth to the degree anticipated, contributing to the write-down," according to the statement.

Klein, on the call, said expectations for the Online Services Division's "future growth and profitability are now lower than we previously expected."

For all of fiscal 2012, Microsoft reported revenue of $73.7 billion, up more than 5 percent from $69.9 billion in fiscal 2011. Earnings for the full year, which also took a hit from the write-down, was $17.0 billion, down nearly 27 percent from $23.3 billion the prior fiscal year.

Microsoft saw strong growth in the fourth quarter across many of its product lines. Revenue from the company's SQL Server and Systems Center products, Klein said, were up 20 percent, while sales of the vendor's Lync communications software grew 45 percent.

Microsoft executives also cited the growth potential from Office 2013, which was formally announced just this week, and the upcoming Windows 8, Windows Server 2012 and Windows Phone 8.

Sales for the Windows and Windows Live Division in the fourth quarter were down 13 percent to $4.1 billion and down 3 percent for the fiscal year to $18.4 billion. The Server and Tools business generated $5.1 billion in revenue in the fourth quarter, up 13 percent, and $18.7 billion for the fiscal year, up 12 percent.

Sales for the Microsoft Business Division in the fourth quarter were up 7 percent to $6.3 billion and up 7 percent for the fiscal year to $24.0 billion. The Entertainment and Devices Division generated $1.8 billion in revenue in the fourth quarter, up 20 percent, and $9.6 billion for the fiscal year, up 8 percent.

The Online Services Division reported revenue of $735 million in the fourth quarter, up 8 percent, and revenue of $2.9 billion for all of fiscal 2012, up 10 percent.