First Loss As Public Company Posted By Microsoft

Microsoft announced on Thursday it had made an accounting adjustment to reflect that an online advertising company it purchased in 2007 had not lived up to expectations that top executives had hope for. The result led to Microsoft’s first quarterly loss ever recorded in the 26 years since its original public offering. The company had warned last month that it was taking the charge that amounted to $6.2 billion because purchasing aQuantive that did not yield the expected returns that were envisioned.

The adjustment made was a paper item, not cash, and is used by companies as a way to reflect assets that have lost value. Microsoft bought the online advertising company for $6.3 billion, but shortly after saw Google increase its ad market share online.

The line item adjustment charge resulted in a second quarter loss of $492 million. Last year during the same quarter, the company reported profits of $5.9 billion. Revenues for the just completed quarter increased to $18.05 billion or by 4%.

Excluding the deferral of part of the revenue for the second quarter to the third quarter and the huge accounting adjustment, earnings were nearly 73 cents per share. That beat the analysts’ estimates of 62 cents per share. The revenue that was deferred from the past quarter to the current quarter was related to the launch of Windows 8.

Prior to the newly recorded loss, Microsoft had never recorded a quarterly loss. Investors for the most part should not be too fazed by the write off. Microsoft’s investors seem to be more concerned with the future and not mistakes that happened in the past.