Cheshire Cat Photo Blog(...said the Cat: 'we're all mad here....')

Today, Microsoft reported its first quarterly loss in 26 years (since 1986) as a public company. Microsoft reported two weeks ago that “…it would taks a $6.2 billion charge in the April-June quarter because its 2007 purchase of online ad service aQuantive failed to help it compete with Google Inc. <which, coincidentally has an unofficial motto of, “Don’t be evil.” > The amount reflected the bulk of the $6.3 billion acquisition cost.”

The online advertising business is just a tiny part (4%) of its annual revenue However, the online ad division continued to post losses, totaling more than $9 billion since the purchase, not including the charge.. “Most of the company’s sales come from its Office suite of productivity software, Windows operating system and, increasingly, computer servers.”

(This last bit, computer “servers,” is perhaps the most frightening part to some of us who are knowledgeable about true server operating systems. 😉 Oh well, “you can fool some of the people all of the time.”)

Business software and “server” sales in the quarter helped offset a flat market for WINDOWS personal computers, and even with the loss, Microsoft BEAT analyst expectations, and Microsoft shares rose 2.4% to $31.39 in after-hours trading after the earnings announcement.

As Forrest Gump’s mother said, “Stupid is as stupid does.”

Including the big write-down on aQuantive, Microsoft booked a $492 million loss in the fiscal fourth quarter, or 6 cents a share. That compares with earnings of $5.9 billion, or 69 cents, a year ago.

Revenue rose 4 percent to $18.06 billion.

Excluding the adjustment and the deferral of some revenue related to its upcoming Windows 8 operating system, earnings came to 73 cents per share.

Analysts polled by FactSet were looking for 62 cents per share of earnings on revenue of $18.15 billion.

Microsoft was conservative in its forcast of revenue from product upgrades like the upcoming Windows 8.

Chief Financial Officer Peter Klein told analysts that for the coming year, “We expect Windows revenue to be roughly in line with the PC market” which it said was flat in the last quarter and is expected to continue that way in the three months through September.

Even if Windows revenue is flat, that will be an improvement since revenue in the division has now dropped in five of the past seven quarters. It fell 13 percent in the quarter to $4.1 billion.

In contrast to Microsoft’s situation, Google has widened its lead in ad revenue, thanks in part to its purchase of DoubleClick for $3.2 billion about eight months after the aQuantive deal. Google’s search engine, which is a major means of selling ads, has remained strong, “…while Microsoft’s Bing search engine saw its market share drop slightly to 26 percent, from 27 percent a year ago. That includes searches through Yahoo Inc., which has been using Microsoft’s search technology for nearly two years.”

Maybe it PAYS to not “be evil.” 😉

-Bill at

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