Microsoft posts record revenue of $18.06 billion, along with net income loss of $492 million

WP Central

We're all tuned into the Microsoft financial results for the fiscal quarter ending June 30th, 2012 and there has been some interesting details revealed. Overall, Microsoft posted a record revenue of $18.06 billion but along with that came the news of a net income loss of $492 million, something almost unheard of for Microsoft. The loss itself, Microsoft attributes to something they're calling "goodwill impairment charge" otherwise known as a "writeoff" to the tune $6.2 billion which stems from their acquisition of aQuantive. Overall though, Microsoft's quarter revenue adds up to a 7% increase from around the same time last year and quarterly operating income brought in a total of $6.93 billion. In other simpler words, a 12% increase in operating income.

Total fiscal year income coming in at $73.72 billion in revenue, with operating income at $21.76 billion. Microsoft's entertainment division helped in this area with things such as Xbox 360 having grown by 20 percent to more than $1.7 billion. On the business side of things, Microsoft raked in a 7% increase with nearly $6.3 billion in revenue. Windows and Windows Live Divisions ended up declining this quarter, slipping down by 13% while still earning $4.1 billion. We'll be digging deeper into the numbers here soon, but for now you can check out the full press release via the source link below.

Update - See our analysis of today's results here.

Source: Microsoft


Reader comments

Microsoft posts record revenue of $18.06 billion, along with net income loss of $492 million


The "goodwill" they paid for when they bought aQuantive turned out to not be as valuable as they believed when the purchase was made I suppose.

That is pretty much exactly what it means. Goodwill is something nonphyiscal that you pay for when you buy a company, such as a trademark, brandname, customer lists, etc. If the value of that goodwill is impaired then it is writen down. It's all legal too through current IFRS standards so MSFT isn't doing anything fishy here.
It isn't a write-off essentially though, not like you would write off a bad debt. It is impaired, which is a contra entry that lowers the net book value of the goodwill so that it resembles fair market value. The full value of the Goodwill is still on their books, it just has an adjusting entry to reflect its fair market value. 

" The full value of the Goodwill is still on their books, it just has an adjusting entry to reflect its fair market value."
I am assuming this is why it is not tax-deductible.

Not sure how it works in the US, but in Canada the impairment is not a tax deductible loss. In fact it is an entry that has no actual monetary value. I believe that it is removed when reconciling Net Income for Financial Statments to Net Income for Tax Purposes, much like amortization (depreciation) is. 
Goodwill impairment is pretty much just like amortization, an adjusting entry to reflect the asset's fair market value.

Impairment is GAAP-only. For Tax you amortize the ORIGINAL amount of the goodwill over 180 months (15 years). It does not matter if you impair or not, because eventually you are going to be able to deduct the entirety of the goodwill amount over 180 months.

Good explanation. I would just add that it's a noncash transaction and their cash flows are still positive. That's why the stock wasn't adversely affected.

I think all he tried to do was regurgitate what was in the MSFT release, however he mangled the information it seems.
Doesn't help that MSFT wrote a fairly bad Income Statement, the Goodwill Impairment should not be in operating expenses (as it is not part of the normal course of operations). It really should be listed after Operating Income in Other Income/Losses. 

Their Operating Income was $192 mil. After accouting for other income, and income taxes (to the tune of $851 mil) their Net Loss was ($492). Their income statement is about a 3rd of the way down the page