Jul 20, 2012

How serious for the company is Microsoft's quarterly loss?

I heard the news this morning that Microsoft was reporting a $492 million loss for the last quarter of 2011. As a child of the 80s-90s, this was a little jarring to hear. The terms Microsoft and loss just don't fit together in my mind. Is Microsoft facing real trouble as a company, or is this a short term thing?


A big part of that loss was due to the acquisition of  aQuantive.  There was a $492 million dollar loss, but that largely sprung from a $6.2 billion write down of aQuantive, so really it was a one time accounting write off of some of the value of MS's online advertising business. Even for Microsoft, $6.2 billion is a lot of money, but don't expect to see recurring losses like this one in the coming quarters.    


Also, there are some big things happening.  Servers and Tools alone generated $18.7 billion in revenue last year, so it isn't as if Microsoft doesn't have some serious capital generating assets.  Azure is very important to Microsoft in the long term, and I don't see any serious problems there.  Windows 8 could be huge (or not), so that remains a question.  If I had to bet, I would wager Windows 8 will be a significant and successful version of Microsoft's OS.  We shall see.    

Ballmer should have been replaced a long time ago, his leadership (or the lack thereof) has really hurt Microsoft over the last ten years. Yes, this is a serious blow to Microsoft. They still have tons of cash, and cash generating franchises. But a loss like this gives the current leadership a big black eye, and it has to have some of the board wondering if the time has come to choose new leadership for Microsoft.
Answer this