Admission that online advertising buy was a dud could lead to quarterly loss
Microsoft is taking a huge $6.2bn write-down on its aQuantive online advertising platform. Reports suggest this means the company’s Online division will announce worse than expected figures when quarterly results are announced later this month.
The move could push Microsoft to a quarterly loss, it has been suggested.
The write-down is an acknowledgement that aQuantive has performed poorly since the 2007 acquisition and that Microsoft does not expect its performance to improve.
Microsoft has consistently struggle to produce any value from its Online division and in a statement the company said that while Bing has been slowly improving its market share, "the company’s expectations for future growth and profitability are lower than previous estimates."
"While the aQuantive acquisition continues to provide tools for Microsoft’s online advertising efforts, the acquisition did not accelerate growth to the degree anticipated, contributing to the write down," the statement added.
The $6.3bn 2007 acquisition was a gamble from Microsoft that clearly has not paid off; it was seen at the time as a response to Google’s $3bn acquisition of rival online advertiser DoubleClick. However since then Google has cleaned up when it comes to online advertising.
In its last financial release, Microsoft’s Online Services Division recorded revenue of $707m and an operating loss of $479m. Google meanwhile recorded quarterly revenue of $10.6bn and a profit of $2.89bn, almost all of that from online advertising.
"This is an accounting decision that the company made based on how the business is performing relative to the projections we had made during the past five years," wrote CEO Steve Ballmer and Online division president Qi Lu, in a memo obtained by Bloomberg.