Microsoft posts net loss despite record quarter

Despite record sales, Microsoft has reported a $492 million (£313 million) loss for its fiscal fourth quarter ending 30 June. That's due to a $6.19 billion (£3.9 billion) write-down related to the 2007 acquisition of aQuantive, now a part of the company's Online Services Division, and an additional $540 million (£343 million) revenue deferral for a Windows 8 upgrade promotion.

Microsoft's $6.3 billion (£4 billion) deal for aQuantive was its largest until the company paid $8.5 billion (£5.4 billion) for Skype last year.

The software giant, which announced the one-time aQuantive write-down earlier this month, reported quarterly sales of $18.1 billion (£11.5 billion), up from $17.4 billion (£11 billion) in the same quarter last year; an operating income loss of $192 million (£122 million); and a loss per share of $0.06 (3p). For its full fiscal year, Microsoft had revenue of $73.7 billion (£46.9 billion), up from $69.9 billion (£44.5 billion) the previous year, but its annual net income of $17 billion (£10.8 billion) was down from the $23.2 billion (£14.7 billion) in profits the company earned in fiscal year 2011.

"We delivered record fourth quarter and annual revenue, and we're fast approaching the most exciting launch season in Microsoft history. Over the coming year, we'll release the next versions of Windows, Office, Windows Server, Windows Phone, and many other products and services that will drive our business forward and provide unprecedented opportunity to our customers and partners," Microsoft chief executive Steve Ballmer said in a statement.

Microsoft recently announced that its highly anticipated, next-generation Windows 8 operating system will arrive on 26 October. The company has also hit the road in recent weeks to promote the coming releases of a new cloud-friendly edition of its Office productivity software suite, its own in-house Surface tablet running Windows 8, and Windows Phone 8, the mobile device operating system that will for the first time share the same kernel as Microsoft's flagship Windows OS for PCs.

Breaking out the performance of its core divisions as measured against the fourth quarter of 2011 and the full year 2011, Microsoft said revenue generated by its Server and Tools business grew 13 per cent in the fiscal fourth quarter and 12 per cent for the year; its Business Division grew 7 per cent in both the quarter and the full year; sales for the Windows and Windows Live business dropped 13 per cent for the quarter and 3 per cent for the year; the Online Services Division enjoyed 8 per cent revenue growth for the quarter and 10 per cent growth for the full year; and the Entertainment and Devices Division had a 20 per cent bump up in revenue for the quarter and 10 per cent growth for the year.

"Microsoft incurred its first quarterly loss in 26 years, driven by a write-down of their aQuantive investment in 2007, which was designed to improve the company's Web monetization and help it compete better with Google. Aside from that massive charge, Microsoft had a pretty good quarter," said Patrick Moorhead, principal analyst for Moor Insights & Strategy.

"It's interesting that Microsoft only realized 23 percent of its quarterly revenue from Windows and Live. This is actually a positive for them given the increased competitiveness of Apple's iOS and OS X, and Google's Android. Microsoft must very closely manage next quarter so as not to disincentivize PC buyers who may want to wait for Windows 8. The Windows 8 upgrade coupons should help, but even that needs to be heavily merchandised to be successful," he added.