Microsoft Announces First Ever Quarterly Loss

Microsoft posting a loss for the first time in its history was more dramatic than the stock reflected, being down about 1.4 percent on Friday. Microsoft burdened its online division with a $6.19 billion impairment charge for the loss in value of Aquantive. The result was a $492 million bottom line loss on record revenue of $18.06 billion. One year ago, Microsoft reported for the second calendar quarter (fourth fiscal quarter) revenue of $17.372 billion and a profit of $5.87 billion.

What is more notable than the "loss" is that most of Microsoft's business are healthy and are driving revenue and profitability increases. Sales of the Business unit (which includes Office), climbed from $5.87 billion in the second calendar quarter (CQ2) 2011 to $6.29 billion in CQ2 2012. Server division sales climbed from $4.52 billion to $5.09 billion and the entertainment unit jumped from $1.49 billion to $1.78 billion on record sales of 1.1 million Xbox consoles, 15 percent growth of Xbox Live subscribers and slowly improving Windows Phone sales.

The concerns are anchored in the Online division, which improved its loss by $266 million with an operating loss of $479 million (down from $745 million last year). Revenue was $0.74 billion, up from $0.68 billion in CQ 2011. It is clear that Microsoft is still struggling to make its Online business bring in a profit. The other interesting weakness is Microsoft's Windows division. Total revenue was $4.69 billion, but Microsoft is deferring Windows 8 upgrade revenue of $0.54 billion and about the same again for the current quarter. One year ago, Windows revenues were $4.74 billion and sales peaked in the third calendar quarter 2011 at $4.87 billion. The fact that Windows 8 is on the horizon surely impacts sales, but the persistent decline since CQ3 of 2011 to $4.74 billion in the fourth quarter and to $4.62 billion in the first quarter of 2012 is more pronounced than we would have expected.

Of course, Microsoft says that Windows 8, scheduled for an October 26 release, will drive PC sales. Due to the upgrade offer, the company expects Windows revenues in Q3 and Q4 to slightly trail the growth of the PC market. Overall revenue growth will be in the "high teens", Microsoft said.

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  • slabbo
    Oh how the tables have turned so dramatically in just 20 years.
  • There will be more losses with Windows 8
  • zorky9
    That's not too bad. The impairment hit will actually provide some tax shelter for them for the year.

    Their Q3-Q4 performance will actually be the thing to watch for.
  • This is mostly due to the write-off of aQuantive, MS had a record quarter

    also Microsoft managed to increase Skype usage by 50 percent

    and finally launched Office Web Apps for SkyDrive
  • CaedenV
    slabboOh how the tables have turned so dramatically in just 20 what on earth are you talking about? If you read the article it is only one division that is negative, and the OS division is 'less positive' but still making 4.6 Billion dollars... in one quarter. Just about every other department grew, including WP sales (surprising considering how many of us are waiting for WP8), and xBox consoles and Live subscriptions when a new console will be coming ~Christmas 2013 and everyone in the gaming world knows it.
  • this is due to aQuantive write-off

    also microsoft managed to increase Skype usage by 50 percent

    and finally just launched Office Web Apps for SkyDrive
  • No this quarterly report is probably only a hint of things to come. Lot's of hopes pinned on Windows 8 across all platforms. Phones,PC's, Tablets. None of which holds big promise for Microsoft or its partners.
  • SteelCity1981
    The fact that Windows 8 is coming means stale sales and more trouble for Microsoft. lol
  • halcyon
    Oh no...the sky is falling! The end is near!
  • willard
    Good to see nobody's missing an opportunity to bash Windows 8. Wouldn't want the comments to be filled up with meaningful posts, would we?