Microsoft posts first-ever loss after giving up Google challenge

By DOMINIC JEFF
Published on 21/07/2012 00:00

Microsoft has posted its first quarterly loss in 26 years as a public company as it abandoned hopes of challenging Google in the online advertising market.

The US software giant had already warned that it would take a $6.2 billion (£3.9bn) charge in the April-June quarter as it wrote down almost all of the 2007 purchase price of online ad service aQuantive, which had failed to turn a profit.

While Google has enjoyed strong growth in recent years, the online ad business remains a tiny part of Microsoft – comprising just 4 per cent of its annual revenue. Most of the company’s sales come from its Office suite of software, Windows operating system and, increasingly, computer servers.

Upbeat business software and server sales in the quarter helped offset a flat market for personal computers, which had put a damper on Windows sales.

Taken as a whole, the group’s results beat analyst expectations. Including the big write-down on aQuantive, Microsoft booked a $492 million loss in its fiscal fourth quarter, which compares to a $5.9bn profit a year ago. Revenues were 4 per cent higher at $18.1bn. Microsoft’s fortunes are now tied to the release of Windows 8 on 26 October, when it will unveil the most extreme redesign of the its flagship operating system since 1995.

Windows 8 will feature a new look and technology that will enable the operating system to work on touch-controlled tablet computers, as well as Microsoft’s traditional stronghold of desktop and laptop computers.

In conjunction with Windows 8, Microsoft is planning to release its tablet, the Surface.