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Microsoft posts first quarterly loss in company history

post #1 of 151
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Despite beating Wall Street expectations for the second calendar quarter of 2012, Microsoft on Thursday reported its first-ever quarterly loss since the software giant went public in 1986.

Microsoft's fiscal fourth-quarter contraction was in large part thanks to a huge multi-billion dollar write-down for its online services division compounded by deferred revenue related to the company's Windows 8 platform, reports The Wall Street Journal.

The Redmond, Wash., company posted a $492 million loss for the June quarter, or six cents per share. The poor performance is contrasted to the year ago period when Microsoft recorded a profit of $5.87 billion, or 69 cents per share.

Earnings were hit hard by a $6.19 billion write-down related to the company's acquisition of online ad agency aQuantive Inc. which was purchased for $6.3 billion in 2007. Compounding the situation was $540 million of deferred revenue earmarked for Windows 8 upgrade promotions. Microsoft is looking to keep Windows 7 sales going through October by offering buyers of select versions discounted upgrades to Windows 8 until the end of January 2013.

Not counting the write-down of its online services division and the deferred revenue connected to the Windows 8 promotion, Microsoft's earnings were actually in the black at 73 cents a share.

Windows 8
Microsoft took a hefty $540 million hit in deferred revenue for Windows 8 promotions.
Source: Microsoft


Overall revenue was up four percent at $18.06 billion for the quarter despite a 60 percent increase in operating costs. The most recent estimates from a poll conducted by Thomson Reuters pegged earnings at $18.13 billion or 62 cents a share.

Breaking down earnings by division, Microsoft's Windows and Windows Live posted a 13 percent decrease in revenue and an 18 percent drop in profits, once again owing to the deferred revenue.

Helping buoy earnings was Microsoft's entertainment and devices division, which saw a significant boost in sales with 20 percent jump year-over-year while online services revenue rose 8.1 percent. Server products, including enterprise network and private cloud computing systems, posted revenue gains of 13% on boosted profit of 24 percent.

Rounding out the revenue winners was the business division which includes Microsoft Office products with a 7.1 percent jump in sales leading to a 9 percent increase in profits.

Microsoft is banking on its "PC+" strategy, described as an ecosystem of devices running a one-size-fits-all operating system in Windows 8, to carry the company as competition heats up in the mobile space. Earlier in July, Microsoft claimed that Apple's "post-PC" era view of devices was wrong, claiming that the iPhone maker's notion to keep mobile and desktop operating systems separate was outdated. Instead, COO Kevin Turner said the future is a convergence of mobile, laptop and desktop devices under one OS, alluding to the presumed capabilities of Windows 8.

Surface 1
Microsoft is looking to kick-off the "PC+" era with its Surface tablet. | Source: Microsoft


For its part Apple still believes in making devices targeted to specific tasks. During the company's most recent quarterly earnings conference call in April, CEO Tim Cook said, "anything can be forced to converge, but the problem is that the products are about tradeoffs. You begin to make tradeoffs to the point where what you have left at the end of the day doesn't please anyone." He went on to quip, " "you can converge a toaster and a refrigerator, but you know, those things are probably not going to be pleasing to the user."

As part of the PC+ initiative, Microsoft introduced its first self-branded tablet called Surface, with the ARM-based version of the device expected to be released alongside Windows 8 which was recently announced to hit shelves on October 26. Although PC+ calls for a completely defragmented ecosystem it seems Microsoft will be breaking that rule out of the gate with Surface for Windows RT, a tablet running a stripped-down version of Windows 8. A more full-featured Intel-based version dubbed Surface for Windows 8 Pro will be released later this year.

While the Redmond firm once had somewhat of a presence in smartphone market during the nascent pre-iPhone stage, Apple's iOS and Google's Android have made the sector a two horse race. Windows 8, along with Windows RT and Windows Phone, represents an opportunity to gain some lost ground in the lucrative portables arena though it remains to be seen whether the new OS will be enough gain substantial marketshare.

As of this writing Microsoft shares were up $0.65 or 2.14 percent in after market trading.
post #2 of 151

Don't worry. Many more are to follow. 

post #3 of 151
Quote:
Originally Posted by Quadra 610 View Post

Don't worry. Many more are to follow. 

I am sure if they get desperate, they can use all that cross licensing they acquired when the bailed Apple so many years ago.
post #4 of 151
According to Ballmer, this is just a rounding error!!
post #5 of 151

They wrote off a lot of assets against a very high gain in revenues. It's not clear whether they had to be written off against the current quarter or if they're just trying to minimize tax liability.
 

post #6 of 151
Quote:
Originally Posted by Quadra 610 View Post

Don't worry. Many more are to follow. 

Agreed. They'll blame it on accounting this-and-that, but the bleeding has officially started. Windows 8 will be the floodgate.

Amazon will follow in a couple of years.
post #7 of 151
Quote:
Originally Posted by anantksundaram View Post


Agreed. They'll blame it on accounting this-and-that, but the bleeding has officially started. Windows 8 will be the floodgate.
Amazon will follow in a couple of years.

I agree also....MS is now in the business of going out of business! Just like RIM, Yahoo, Nokia, and Dell! Crunch!

post #8 of 151

It's a shame Apple opted to move away from the enterprise market because Microsoft is there for the taking. Most of their profits come from areas were they still have a dominant market position or virtual monopoly - Windows, Exchange and Office. 

post #9 of 151

$492 Million Dollar loss in this quarter for MSFT and the earnings estimate for Apple in this 3rd Quarter is for a profit of 9.71 billion.  Apple could beat the estimate by more than 10%.  Apple's 3rd quarter profit to exceed 20 times Microsoft's near half billion dollar loss this quarter.

post #10 of 151
Quote:
Originally Posted by hmm View Post

They wrote off a lot of assets against a very high gain in revenues. It's not clear whether they had to be written off against the current quarter or if they're just trying to minimize tax liability.
 

"a very high gain in revenues"???? Four percent is a very high gain in revenues these days?

They would crucify the entire management team at Apple if they only produced a 4 % gain in revenues.

Of course, you have to ask about their strategic planning. They bought a company for $6.3 B and had to write off $6.2 B of that 5 years later. Didn't they make ANY due diligence effort?
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post #11 of 151
Quote:
Originally Posted by hmm View Post

They wrote off a lot of assets against a very high gain in revenues. It's not clear whether they had to be written off against the current quarter or if they're just trying to minimize tax liability.

Actually it was a company that they bought -- in the mobile ad space, I think -- whose value had to be written down to zero. They had no choice but to recognize it at some point.

It is just a small example of a set of poor decisions over the past decade that will slowly start to catch up with them.
post #12 of 151

So earnings were up 4c from 69c to 73c over LY, excluding accounting shenanigans which means they will pay less tax on their increased earnings? Looks like that's what most are taking away from this, hence the reaction on the street.

post #13 of 151
A one-size-fits-all operating system, of course! That is so obvious now. Well, except for Sync because, you know, cars are different. And Xbox, logically, because entertainment systems have different needs from PCs.
post #14 of 151
Quote:
Originally Posted by Shaun, UK View Post

It's a shame Apple opted to move away from the enterprise market because Microsoft is there for the taking. 

Apple does not do low margins. The enterprise market will have to come to Apple.
post #15 of 151


Quote:
Originally Posted by anantksundaram View Post


Actually it was a company that they bought -- in the mobile ad space, I think -- whose value had to be written down to zero. They had no choice but to recognize it at some point.
It is just a small example of a set of poor decisions over the past decade that will slowly start to catch up with them.

I would bet against MS's next quarter being a loss.
Edited by SolipsismX - 7/19/12 at 5:32pm

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post #16 of 151
Quote:
Originally Posted by Hellacool View Post


I am sure if they get desperate, they can use all that cross licensing they acquired when the bailed Apple so many years ago.

 

They didn't bail out Apple. Apple bailed themselves out, with court backing, using Microsoft's money.

post #17 of 151
Quote:
Originally Posted by hmm View Post

They wrote off a lot of assets against a very high gain in revenues. It's not clear whether they had to be written off against the current quarter or if they're just trying to minimize tax liability.
 

Can you translate that to english?

post #18 of 151
Quote:
Originally Posted by AppleInsider 
Earnings were hit hard by a $6.19 billion write-down related to the company's acquisition of online ad agency aQuantive Inc. which was purchased for $6.3 billion in 2007.

All these big companies, they write off everything:


Quote:
Originally Posted by AppleInsider 
Not counting the write-down of its online services division and the deferred revenue connected to the Windows 8 promotion, Microsoft's earnings were actually in the black at 73 cents a share.

Yeah, let's see if Windows 8 pulls through for them. Sad thing is, they have x86 vendors so locked down that they can pretty much guarantee revenue from 300 million+ machines and a pretty significant percentage of them in Office sales too. It wouldn't even matter the quality of the OS, there's no viable alternative for non-Apple x86 hardware manufacturers.
post #19 of 151

And their solution to stop losing money?

 

Stop selling on Mac.

 

LOL

 

No wonder the company is toast.

 

Then there is that brick that can't decide if it's a laptop or a tablet...

 

 

Apple has had the Surface for a while now... it is called the MacBook Air.

post #20 of 151

LOL

post #21 of 151
Quote:
Originally Posted by Hellacool View Post


I am sure if they get desperate, they can use all that cross licensing they acquired when the bailed Apple so many years ago.

 

You mean the cross-licenseing, product commitments, and money they had to pay as part of the settlement for stealing Quicktime code?

post #22 of 151
After a announcement of halting Mac office sales, Surface and that horrible unveiling....lol

That's quite a tank of profit.
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post #23 of 151
Quote:
Originally Posted by 9secondko View Post

And their solution to stop losing money?

 

Stop selling on Mac.

 

Where have they done that?  Last I heard MS still sells Office 2011 and likely will be selling Office 2014 which will again be different from the recently announced Office 2013 (Windows).  MS has not announced that they are stopping anything on the Mac.

post #24 of 151

I like to M$ bash as much as the next guy, but this is really non-news.

 

They had $6.1 billion in profit this quarter, except they decided to do some shady accounting in regards to the acquisition of aQuantive in 2007. Meaning they spent the $6.3B 5 years ago and reporting that money as lost this quarter. Obviously they made a profit that quarter in 2007 even after wasting the money, so this is just tricky bookkeeping (probably to reduce their tax responsibility).

 

So, no this is not the beginning of the end for M$, as much as we all would like it to be.
 

I own...

1 Android Phone, 2 iPads, 1 Windows Tablet, 1 Mac Desktop, 1 Windows Laptop, 1 Linux Server, 1 Linux HTPC

 

They all are used regularly and each have their place. Competition is good.

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1 Android Phone, 2 iPads, 1 Windows Tablet, 1 Mac Desktop, 1 Windows Laptop, 1 Linux Server, 1 Linux HTPC

 

They all are used regularly and each have their place. Competition is good.

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post #25 of 151
.

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post #26 of 151
Quote:
Originally Posted by Hellacool View Post


I am sure if they get desperate, they can use all that cross licensing they acquired when the bailed Apple so many years ago.

 

Apple has a couple hundred million on it's books when that deal happened; Microsoft did not bail out Apple.

post #27 of 151
Quote:
Originally Posted by anantksundaram View Post


Apple does not do low margins. The enterprise market will have to come to Apple.

 

Not a cat in hells chance and anyway it's a bit difficult if Apple don't have any enterprise products to offer, which is why Microsoft will keep rolling along making a tidy profit most of the time.

 

I'm sure a lot of companies will adopt the iPad but it's not going to replace their Windows desktops and Exchange Server networks.

post #28 of 151
Quote:
Originally Posted by Shaun, UK View Post

It's a shame Apple opted to move away from the enterprise market because Microsoft is there for the taking. Most of their profits come from areas were they still have a dominant market position or virtual monopoly - Windows, Exchange and Office. 

 

The iPad will bring Apple back into the enterprise fold. It has already started. The typical desktop PC will take a back seat to portability as a mainstream in a couple of years, if not less. Desktops will still be needed, but the quantities, up front and on-going investments, will lesson, opening the door for some the best of Apple's workstations. It's only a matter of time before the enterprise community gets 'tapped' in to Apple's ecosystem. Same principal as the iPhone.

post #29 of 151

Apple should return the favor and help Microsoft out with a bail out.......NAH

post #30 of 151
Quote:
Originally Posted by Hellacool View Post


I am sure if they get desperate, they can use all that cross licensing they acquired when the bailed Apple so many years ago.

 

Apple wasn't bailed out... here is a good description of what really happened.

 

http://www.zdnet.com/blog/apple/stop-the-lies-the-day-that-microsoft-saved-apple/7036

post #31 of 151
Quote:
Originally Posted by SolipsismX View Post

I would bet against MS's next quarter being a loss.

Huh... What makes you think I would bet differently?
post #32 of 151
Quote:
Originally Posted by cmvsm View Post

 

The iPad will bring Apple back into the enterprise fold. It has already started. The typical desktop PC will take a back seat to portability as a mainstream in a couple of years, if not less. Desktops will still be needed, but the quantities, up front and on-going investments, will lesson, opening the door for some the best of Apple's workstations. It's only a matter of time before the enterprise community gets 'tapped' in to Apple's ecosystem. Same principal as the iPhone.

 

Why? Why would you swap your comfortable to use, ergonomic desktop for an iPad? I just don't see the reasoning. Who wants to sit and stare at a 10" screen all day? That would drive me mad. I can see that you might have a desktop as your primary machine and a tablet as your secondary portable machine instead of a laptop but not the other way around.

 

And I don't see how this opens the door to the Apple workstations. Have you ever bought a small business computer system? I have and I can tell you Apple didn't even come close. I bought a Dell Server and PCs with MS Exchange Server for a fraction of what it would cost to install Apple kit. Enterprise is all about price which is why Apple got out in the first place. Fortunately you can always add Macs into that ecosystem if needs be.

 

Apple has done away with X-Serve and downgraded it's server solution in Mountain Lion so even if you wanted to go for an Apple solution you can't. What would you buy - a Mac Mini? Yeah right. If you're a small business with a handful of Macs you could always go peer-to-peer I guess or use a Cloud based network solution but it's hardly an ideal solution for most small businesses. Maybe Apple has something up their sleeve with iCloud - I hope so. The Microsoft solution was a nightmare to administer and costly to maintain but without a viable alternative what are you supposed to do. 

post #33 of 151
Quote:
Originally Posted by anantksundaram View Post

Huh... What makes you think I would bet differently?

You made a couple comments that state it will occur again. I guess I assumed too much by thinking you meant in concurrent quarters.

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post #34 of 151
Quote:
Originally Posted by Shaun, UK View Post

Why? Why would you swap your comfortable to use, ergonomic desktop for an iPad? I just don't see the reasoning. Who wants to sit and stare at a 10" screen all day? That would drive me mad. I can see that you might have a desktop as your primary machine and a tablet as your secondary portable machine instead of a laptop but not the other way around.

And I don't see how this opens the door to the Apple workstations. Have you ever bought a small business computer system? I have and I can tell you Apple didn't even come close. I bought a Dell Server and PCs with MS Exchange Server for a fraction of what it would cost to install Apple kit. Enterprise is all about price which is why Apple got out in the first place. Fortunately you can always add Macs into that ecosystem if needs be.

Apple has done away with X-Serve and downgraded it's server solution in Mountain Lion so even if you wanted to go for an Apple solution you can't. What would you buy - a Mac Mini? Yeah right. If you're a small business with a handful of Macs you could always go peer-to-peer I guess or use a Cloud based network solution but it's hardly an ideal solution for most small businesses. Maybe Apple has something up their sleeve with iCloud - I hope so. The Microsoft solution was a nightmare to administer and costly to maintain but without a viable alternative what are you supposed to do. 

I agree with this. Nicely summarized. Apple will likely end up with some decent, but not huge share -- say, in the teens -- in the enterprise over time (e.g., one can see senior managers of many companies on Macs), with Microsoft still being the back (and low) end.
post #35 of 151
Quote:
Originally Posted by doh123 View Post

Apple wasn't bailed out... here is a good description of what really happened.

http://www.zdnet.com/blog/apple/stop-the-lies-the-day-that-microsoft-saved-apple/7036

Microsoft invested in apple and declared future support to its mac office suite to instill confidence not only to investors but users as well. Did this save apple? Most will argue yes. Others don't
post #36 of 151
Quote:
Originally Posted by SolipsismX View Post

You made a couple comments that state it will occur again. I guess I assumed too much by thinking you meant in concurrent quarters.

I made one comment generally agreeing with Quadra's sentiment, and then qualified it. You may want to re-read what I wrote.
post #37 of 151
Quote:
Originally Posted by Just_Me View Post

Microsoft invested in apple and declared future support to its mac office suite to instill confidence not only to investors but users as well. Did this save apple? Most will argue yes. Others don't

Because 'most' are Windows users and hence, biased.

What else would you expect?
post #38 of 151

Somehow Ballmer still has a job...what has he produced in the last decade that makes money?
 

post #39 of 151
Quote:
Originally Posted by doh123 View Post

 

Apple wasn't bailed out... here is a good description of what really happened.

 

http://www.zdnet.com/blog/apple/stop-the-lies-the-day-that-microsoft-saved-apple/7036

Well whatever happened I was at Mac World when Steve said  (paraphrasing) "And now Mac OS ships with the best browser on the market today, Microsoft Internet Explorer. IE will be the default browser on Mac OS." He was nearly booed of the stage. The crowd was very displeased by that remark in light of the overwhelming support Mac users had for Netscape at the time.

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post #40 of 151
Quote:
Originally Posted by Quadra 610 View Post

They didn't bail out Apple. Apple bailed themselves out, with court backing, using Microsoft's money.

You may want to pull your head out of the sand and do a little research. I know you hate anything not Apple but Google is your friend. News flash, you do not walk away with a cross licensing if what you say is true.
Edited by Hellacool - 7/19/12 at 6:43pm
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