Microsoft writes off $6.2b ad firm purchase

 

Admits bad buy.

Microsoft has taken a $US6.2 billion hit to its balance sheet as the software giant admitted an online advertising agency it bought five years ago was effectively worthless.

The announcement came as a surprise but did not shock investors, who had largely forgotten Microsoft's purchase of aQuantive in 2007.

The acquisition was expected to boost Microsoft's online advertising revenue and rival Google's purchase of DoubleClick at the time.

Microsoft said in a statement that "the acquisition did not accelerate growth to the degree anticipated, contributing to the write-down".

Shares in the company dipped slightly to $30.35 in after-hours trading, after closing at $30.56 in regular Nasdaq trading.

The aQuantive buy was Microsoft's largest at the time, exceeded only by its purchase of Skype for $8.5 billion last year. But it never proved a success and top executives at the ad firm soon left Microsoft.

As a result of its annual assessment of goodwill — the amount paid for a company above its net assets — Microsoft said on Monday it would take a non-cash charge of $6.2 billion, indicating the aQuantive acquisition is now worthless.

The charge will likely wipe out any profit for the company's fiscal fourth quarter. Wall Street was expecting Microsoft to report a fiscal fourth-quarter net profit of about $5.25 billion, or 62 cents a share, on July 19.

In addition to the write-down, Microsoft said its expectations for future growth and profitability at its online services unit — which includes the Bing search engine and MSN internet portal — are "lower than previous estimates".

The company did not say what those previous estimates were, as it does not publish financial forecasts.

Microsoft's online services division is the biggest drag on its earnings, currently losing about $500 million a quarter as the company invests heavily in Bing in an attempt to catch market leader Google.

The unit has lost more than $5 billion in the last three years alone. Even though its market share has been rising, Bing has not reached critical mass required to make the product profitable.

Before rolling out Bing in June 2009, Microsoft's Windows search engine had eight percent of the US internet search market, compared with Yahoo's 20 percent and Google's 65 percent.

In the three years since then, Bing has almost doubled its market share to 15 percent, but that has been mostly at the expense of Yahoo, which has had its share whittled down to 13 percent. Google now has almost 67 percent, according to research firm Comscore.

(Reporting by Siddharth Cavale in Bangalore, Bill Rigby in Seattle; Editing by Supriya Kurane, Bernard Orr; )


Microsoft writes off $6.2b ad firm purchase
 
 
 
Top Stories
Photos: iTnews Benchmark Awards countdown begins
Just a few days left until entries close for 2014.
 
Australian Govt to rethink cyber security strategy
Six-year old policy to be refreshed.
 
The failure of the antivirus industry
[Blog post] Insights from AVAR 2014.
 
 
Sign up to receive iTnews email bulletins
   FOLLOW US...
Latest articles on BIT Latest Articles from BIT
More 4G from Optus in Darwin
Nov 21, 2014
Click to see where Optus has expanded coverage to the suburbs near Darwin.
Optus steps up regional 4G coverage
Nov 20, 2014
Once 700Mhz services are working, Optus claims regional users will have a "faster and more ...
This Huawei 4G phone costs $99
Nov 12, 2014
The $99 Huawei Ascend Y550, available through Vodafone, enters the budget market as one of the ...
4G smartphones: Microsoft's Lumia 830
Nov 7, 2014
Microsoft has announced its flagship Windows Phone, the Nokia Lumia 830 4G, will be available in ...
Do you direct debit customers? Read this
Oct 10, 2014
Authorities have been targeting direct debit practices with iiNet and Dodo receiving formal ...
Latest Comments
Polls
Who do you trust most to protect your private data?







   |   View results
Your bank
  38%
 
Your insurance company
  3%
 
A technology company (Google, Facebook et al)
  8%
 
Your telco, ISP or utility
  7%
 
A retailer (Coles, Woolworths et al)
  2%
 
A Federal Government agency (ATO, Centrelink etc)
  20%
 
An Australian law enforcement agency (AFP, ASIO et al)
  15%
 
A State Government agency (Health dept, etc)
  5%
TOTAL VOTES: 1071

Vote