Microsoft warns of a possible and massive future write-off due to Nokia devices acquisition

Microsoft may be forced to take a big one-time financial charge in the near future due to its acquisition of Nokia's Devices and Services division in April 2014. Microsoft bought the division, which makes its Lumia smartphones, for $7.3 billion.

Microsoft quietly made that rather major revelation in its report on their 2015 fiscal third quarter results that was filed last week to the US Securities and Exchange Commission. It noted that revenues from the phone hardware division from that quarter came in at $1.4 billion, versus its costs of $4 million As noted first by Computerworld, this means Microsoft actually lost 12 cents for each of the phones the company sold during that period.

Microsoft said that the phone division "is at an elevated risk of impairment" and added:

"Declines in expected future cash flows, reduction in future unit volume growth rates, or an increase in the risk-adjusted discount rate used to estimate the fair value of the Phone Hardware reporting unit may result in a determination that an impairment adjustment is required, resulting in a potentially material charge to earnings."

Microsoft has already said it has plans to reduce costs in its phone hardware division, but has not given any specifics.

This would not be the first time Microsoft would have to take a huge one-time charge based on the acquisition of a company. In 2012, Microsoft took a $6.2 billion writeoff in its fiscal fourth quarter of that year, in order to deal with the costs of buying the online ad company aQuantive in 2007, which did not perform as expected. Microsoft recorded a net income loss of $492 million for that particular quarter, due mostly to that aQuantive one-time charge.

Source: SEC.gov; Via: Computerworld

393 Comments
  • Do they not make money with free licenses and low budget phone.. well that is rather suprising
  • More about volume - or lack thereof - and not having many high-end phones.
  • Flagship! Flagship! Flagship! But I thought the low end and the mid range Lumias sell more and contribute greatly to the earnings?
  • They contribute more to the future of Windows Phone, with market share, than they do now with revenue.  You have to spend a dollar to make a dollar (they say). 
  • Exactly, that's what all these low-end and mid-range phones lately have been about: marketshare to increase user base. Flagships will come with Windows 10 to introduce the new OS and universal apps.
  • Yeah, a DOA flagship, just like the 1520, icon, 930, 920, etc. Developers aren't suddenly going to start making apps for windows 10. every new version it's the same dream. we're losing high profile apps faster than we're gaining them. It's not worth investing in.  WP is basically dead. Time to buy a few flagships now, cause in a year when it's abandoned all you'll have to choose from is android and iOS. I love windows phone, but 10 is looking nuts and backwards, developers ARE NOT COMING, and microsoft is updating slower than android and getting further behind. it's done. 
  • Universal apps on Windows 10 have a chance to change that. Much more than Windows Phone 8 or 8.1 ever did. You can of course do what you want but Windows Phone is not done yet and I find the course of events too exciting right now to leave. If Windows Phone turns out to be discontinued a year or two from now, I can still get an Android or whatever phone then, right? In the meantime I'll keep enjoying my new and shiny Lumia 640 every did and I look foward to Windows 10.
  • I'll likely stick with my 930 and 8.1 for a LONG time. I don't like android or iOS, but i'm not going to pretend it's suddenly going to do well on the market. that would be insane. Of the 8 people i knew with windows phones not related to me, only one still has one. the rest had them for years, but finally got fed up and jumped to android. that's the direction the market is going. 
  • So, 8 people are indicative of the direction of the global market? Lol....
  • No, of course not. the falling sales and fact that they're literally burning through huge piles of cash trying to keep this dead platform afloat is indicative.  Elop wrote a great email a few years ago... can't remember what he said... something about a burning platform...? 
  • Windows Phone sales aren't falling. The decrease in unit sales since Microsoft took over is in Asha and feature phones.
  • Same part of the business, same struggling market share. 
  • No no, Elop told that customers and operators requested 3rd platform and ecosystem. Maybe he was lied as that didn't happen. Operators didn't want 3rd ecosystem and neither did customers as when WP platform was announced the Nokia devices sales drop from + 20 million smart devices per quarter and was still increasing and WP sells less than 10 million per quarter. And now after 4 years ago the market has tripled and still WP market share has not reached even 5%. So, wonder how long it takes for Microsoft and Mr. Elop to accept the failure and do some dramatic changes? Think about it, Mr Elop was given market leader in devices (Nokia) and the R&D and marketing budget of Microsoft and still WP haven't delivered. Where is the accountability which Mr. Elop always markets?
  • you're high if you think this is just elops fault. the OS sucks, the hardware always behind android, and the apps have never been there for ANY OF MICROSOFTS STORES. Elop might not be the best, but this is clearly a MS screw up.
  • Yep, Nokia ecosystem had at the time when the WP decision was announced around 100.000 apps in their store, WP had 8.000 apps so it was clear that the WP ecosystem was not up to speed then nor its today. Mr. Elop and his management team plus consulting army was behind this decision (changing Nokia's direction and selecting WP). Who is left from that team, only Mr. Elop, and why is that? As a shareholder though with very small amount I don't understand the Microsoft money spenditure nor their strategy. And hard facts' speak for themselves (market share, profitability, ecosystem).
  • So jump ship and be done with it! If you hate the platform so much, go find one you like, and quit your whining about how much you hate the Windows Phone.. Most of us here still like and appreciate the Windows Phone and the Windows ecosystem.
  • That's exactly what i said. i hate windows phone.  or i said i liked it a lot, and didn't understand the horrible decisions made over the past 5 years or the ones going forward. 
  • I'm strong supporter of WP and I love my Lumia 1020. What I don't like is Microsoft not able to promote, market, build strong ecosystem, great devices etc and therefore I'm very critical towards the WP. Hence, I suggest that Microsoft takes some drastic measures to change the course. With the current road I don't see much of a future.
  • I like wp too, and the 1020 is a great phone. i had one for about a year. I agree, it's a mess. 
  • Honest question, are you bi-polar?   Because you said you hate Wp and then love WP all within the same hour.
  • I never said I hate wp. i said it was a mess, late to market, screw up after screw up, not getting enough development, behind on developer tools and api's, the app store sucks, missing features, and market share won't improve. all of that is true. I still love the UI and think it's the nicest OS to use on mobile. 
  • As a shareholder I'd say he has every right to complain about their bad decisions.
  • as a shareholder he should be happy cause MS stock is doing pretty good.
  • The OS sucks? Please take a hike. The OS is far better than the other 2. It's the app situation that sucks..
  • That's not accurate. the kernel and the UI are great, but the OS is missing a ton of features, not to mention the terrible API's that make development difficult or even impossible when they're missing. it's years behind the other two, and not gaining ground. 
  • What exactly is it missing? As far as basic UI features 8.1 brought it to same level as the other two in my opinion. WP7? Yes absolutely was the laughing stock of the phone OS's. Whatever you think about APIs, apps, development costs, bla bla it still a great OS. The other two are so bland and boring. Wife has an Galaxy S4. Every time I mess with that pos I want to throw it out the window, Android is so horrible
  • I'm glad it's to the same level in your opinion. As far as features though, it's far behind. There are many features iOS and android have that wp doesn't, and basically none that wp has the others don't. cortana? come on, it's like 2 countries and barely worth bothering with (my country is included).  I love WP, but years of poor management and bad decisions have killed it. 
  • First and foremost it doesn't tell you that you have a voice mail. I have to constantly call my voice mail service to see if I have any. Conversely if I put my SIM in an Apple device (can't remember if it applies to Android or not) and I have a voice mail, even if its one I got while the SIM was in my Lumia the first thing that pops up is a notification of an awaiting voice mail.
  • one of dozens of features that just still aren't on wp. they're the worlds largest OS and software maker. you'd think they'd be pretty quick. 
  • my wp alerts to to voice mails and i can listen to them without actually dialing in anywhere.
  • I wish I didn't agree with you, but that's what's happening.  Windows 10 isn't going to bring a massive influx of developers.  If devs want to make a program for Windows they make it for x86 desktop, not the modern api.  I think a lot of folks on here are users and not developers, they don't understand that there's a pretty big gap in development capability between standard desktop and the modern app's.  There's a ton of limitations if you want to put your program in the windows store as opposed to the desktop, and Win10 isn't changing that. If I'm making a mobile app, for the most part I release on Android first, cause it's the easiest to develop for.  Then iOS cause it's the easiest to make money for.  Then I after a few weeks of crippling my WP version, yanking out the third party assets that only support iOS and Android (very few third party assets support WP) so that I can get it to run, then trying to find alternative packages that do something similar on WP I'll release that build.  It's crappy, I hate it, I love my WP, I have far fewer issues with it than I ever had on Android.  I'd love to support WP first but the marketshare just isn't there.  Besides having some development limitations I have a game I wrote a while back, on iOS I sold a modest 300 copies.  On Android I sold 50.  On WP I sold 2.  Just 2. I have a new game now, much better than the last.  I'm hoping the situation to be a little better than last time, but it's a small hope.
  • Yeah, you're exactly right. crap API's and no impetus to use modern makes it not worth developing for. with so many windows 7 and pre systems, why would you limit your x86 app by ignoring win32? Gaming api's are still terrible on modern. If they were decent enough to offer the quality of gaming people on pc expect, the next halo (which may come on pc) would be a modern app. I don't think that's likely or possible. win32 rules and will for years to come.  What are your games? 
  • When they first announced Win10 and the universal app store I was hoping they were going to make the full Intel switch on their phones, for development that would have been great.  Steam running on my phone, glorious.  But sadly, tis a dream.   I'm loathe to tell you the game I'm referring to above simply because it's so terribly bad.  I actually pulled it from the Android store b/c at some point, Jelly Bean I think, Google changed something and broke how the accelerometer sensors work and my game didn't work right, and because it wasn't exactly a raging success I didn't want to bother fixing it.  No one was downloading it anyway.  I pulled it from Apple a little while after downloads dropped off, Apple charges an annual dev fee and I wasn't making enough to keep paying it.  My new game I made in Unity, it handles the 2 billion different Android devices saving me a lot of headache, and is cross platform, well, almost, still doesn't compile for Windows Store, but Unity has informed me it's a known bug and is going to fix it.  Anyway, that game is called Letter Farm, it's on Android already, I'm going through the approval process on iOS (yes, I rebought a license) and once that bug is fixed in Unity I'll get my WP version out.   Because the game uses a combination of in app purchases and Unity ads, and since neither of those third party plugins I use support Windows Store I've had to change the monetization for that build.  I'm considering either making it $1 up front and give u the ability to earn the in-game currency by playing the game itself, and then you use that to buy items (like gold in diablo).  The classic game model.  But given how my last game sold only 2 copies, maybe I'll just release it for free with no strings attached, no in-app purchases, no advertising.  I've already made the game, it's not like I have anything to lose.  I'm considering adding a link to a youtube video on the main menu of the game.  I have a son with Type 1 Diabetes and we're very active in a charity.  So I thought maybe I'll release it for free with no monetization and say to people, "if you like this game, and want to give me props to me and WP, donate to this charity, the money goes to great kids with a life long illness and every little bit helps."   Also that'll earn me sweet brownie points with the wife, even if I only get 1 donation, when she asks me who it's from I can say, "Oh, well, you see, I released my game for free..."  :D
  • Trying to find it on the play store, but no luck!  charity sounds great, and it might make more sense. Sounds like a great idea! 
  • Which brings me to my gripe with Google.  Visibility.  Getting your app any kind of exposure is very difficult.  It's not exactly a big secret the big devs just pay for visibility.  It's how Zynga can release a game and without any reviews or downloads it'll be featured games list. Anyway.  </rant> https://play.google.com/store/apps/details?id=com.BundyGames.LetterFarm
  • release that mofo on WP. my wife will be all over that.    I literally searched for the name and couldn't get it. 
  • Oddly enough if I target WP8 and not WP8.1 then it compiles just fine.  But I wanted to support Windows Store because my mother in law has a Surface Pro 3 and loves word games.  Anyway, I'm hoping in the next couple weeks Unity will have it sorted out.  They released a patch today, so I'm going to give it a shot tonight.  I'll have to make the video first though. Yeah, Google ranks things weird.  If you search for Hansen then you can find it.  Know why?  Cause some girl who's last name is Hansen reviewed it. I get more downloads on Amazon than Google.
  • I think what they did with with the zune hd was going in the right direction even their asus demo was nice looking all they'd need to do is update it
  • He was describing Symbian as a burning platform not WP. Now WP is a burning platform.
  • yep. 
  • they are not burning thru huge piles of cash, they dont really have falling sales as sales are up but marketshare is flat.
  • I am about to buy a 930, do you recommend it? I hear a lot about the phone getting warm even during calls and taking pictures, let alone games...also they say the battery sucks. How's yours doing?
  • It does get hot, and tbh, I thought the 1520 was a FAR better phone. My wife made me sell mine, because she thought a bright yellow large phone looked stupid, and she hated me using it in public. silly, but you know. Mine gets hot, battery isn't as good as 1520, you know about sd/glance etc. it isn't my favorite phone. I think the 1520 is a far superior device. I'd just grab one of the international ones with Qi built in, and then you easily have the best WP on the market. The size is huge at first, but i found after a week it was perfect. 
  • Personally, I'd wait for a Win10 flagship.
  • universal apps won't fix anything. If you don't have a starbucks app now, why would they make one for Windows 10 that works on laptops, tablets and phones?  it's a bit rough scanning a 17" toshiba in the line at starbucks. 
  • Universal apps are available now as well for WP8.1, you can see many apps that have gone universal and available on Phone and Win8.1. If WIn10 doesn't provide more robust and powerful API, then we will still see same DEV interaction that we see now i.e. minimal.. There is nothing exciting in WP10 for consumers that would make them flock to the platform...  What they can do to attract developers is provide a truly Universal apps platform where they can create apps for Windows, Phone, Xbox, Hololens and Android in the same project with minimal changes...
  • I LOVE everythinfg MSFT.... BUT I too can't help but see the writing on the wall. Windows 10 is a step backwards when it comes to touch and you couldn't be more spot on about the app situation. At this point I'm super pissed I didn't just jump on the iphone6 wagon last December... OH LOOK my 830 is already discontinued... Go figure.... NOT TO MENTION every freaking app and service I use from MSFT is now on IOS and prolly runs better wih more features on IOS. Satya pulling the trigger on plan B must have been why he was so against the Nokia purchase to begin with.... It's corpse is rotting as we speak...
  • I'm in the same spot as you cribbcabel except I'll probably get a Galaxy S6.  I'm running out of reasons to tell myself to stay with Windows Phone for the next upgrade cycle.
  • every single app on iOS  is better. Even MS office is better on iPhone than on WP. 
  • i have an iphone 6 and currently using the Lumia 830. I rarely use the iphone 6 for anything other than taking voice calls for work. The 830 is a much better phone in all respects for me.
  • Low-mid ends sell really well and that's where Microsoft makes the slightest profit margin. Right, they need to sell more and more flagships to make noticeable profit.
  • The article says they're losing 12 cents on every phone the sell, so that would mean there's zero profit margin, even on low end devices.
  • Not losing - lost. It was a specific reporting period.
  • Or maybe all the dispatched units didn't even sell.
  • Or maybe there are just additional costs that the low sales are not covering.
  • I'm sorry but a lot of the new phones coming out look really ugly.  No one is going to buy that.  It's like buying a hawaiian shirt.  They just need to make their phones look like this. http://i1-news.softpedia-static.com/images/news2/Microsoft-Lumia-940-XL-...
  • I've got a Lumia 640 and it looks beautiful in blue. :)
  • Gatanui, you can't compare it to what I posted.  It has that ugly thick border and the case wraps around the phone looking all shiny and plasticy.  It looks like something from Fisher Price.   Only reason I have a lumia 830 is because it actually looks pretty good compared to the other phones.  It's still not as good as it could be, but that was why I bought it.  The look was the first thing that pulled me in, and then it was the specs to see if the processor can handle the 5" screen and such.   When people go to those phone stations at malls or what not, they are always looking at the pretty phones.  I'm sorry but Microsoft has to create their own look and stop living off the lumia thing.  They need to defeat apple with design.  And honestly that concept phone is amazing.  My friend who is a designer and obsessed with Iphone 6 design said she would buy it because of how pretty it is.  That's why people buy phones!  You flood the market with pretty phones and advertise them well and people will buy them.  Like I said, the apps aren't being made for Windows phone because no one has them!  They are no where, they don't catch the eye.  The only peoples' eyes it catches is the people who see the prices not the phone.  Those same people won't buy apps likely.  They want to save as much money as possible and expect everything to be free.  
  • I actually like the blue border on my phone, which isn't even too thick as you say. I think it looks great for a mid-range phone. This said, I get your point and that concept looks really sweet. That's something they could do for a high-end phone, though, not for a low-end. I think the current Lumia designs they inherited from Nokia are great for cheaper phones but I agree they should look for something new for the high-end. Let's see what the flagships bring later this year.
  • i have a 930, and the back color is basically useless. my 1520 had color on the front and that was WAY better. 
  • +920
  • Wow! I only wish the Lumia 940 or 1530 would look like that. That is beautiful and will catch a lot of eyes. Take note MS! Posted via Windows Phone Central App
  • That would mean ditching PureView though. Might not be a bad option.
  • It looks a lot like a motorola meets Lumia. I am not saying I don't like it, but I do like the design of the 830. I think the metal bevel with a hint of color (or not for those who like Black / white) looks rather modern and functional. 
  • I really hate rounded edges on phones and tablets. Give me some 90-degree angles.
  • coip.  Depends on how i'm holding my phone but at times the strong edge on the Lumia 830 annoys me as it jams into my hand.   I wish it was a rounded edge.  I get everyone has their own tastes.  But rounded edges sell in the mainstream. Microsoft needs to focus on majority of people.  Once they are popular enough.  OEMs will provide all sorts of variety.  The way I see it is, MIcrosoft can be like Apple with their own gorgeous high end vision but with one difference, they also have OEMs which apple does not.  The OEMs would provide the variety.  Microsoft shouldn't take on too much at once.  If they focus on high/mid-range and then talk to OEMs about providing low range phones.  They have too much on their shoulders right now.  Apple doesn't worry about all these different types of phones.  They release 2 phones, both high end and that's that.  Microsoft needs to lower their work load.  They have sooo many things they are working on right now.    
  • If MS stop making low end phones, there is a possibility that no one else will take the spot. Now, talking about design, my opinion is that the Lumia family has some nice designs given the price point of each phone, and there were some great flagships in the past (920/1020, 925, 8x, and 1520). A flagship made of plastic doesn´t bother me, mainly because I don't get the "premium" status that some people give to aluminium and/or stainless steel (my kitchen is filled with both).
  • the 830 Design is about the best designed phone on the market, its beautiful, now just make that into a flagship in 2 different sizes.
  • Sorry, but that design does absolutely nothing for me. Looks.like something LG would put out and they're not exactly a bastion of design prowess. My 830 is probably my least favorite Nokia design. The frame is too square for the rounded screen edges. The back fees flimsy and it's overall just an ok design. Same with the iPhone 6 that your "designer" friend loves. It's mediocre design assembled very well. A huge step back from the iP 4 & 5 from an industrial design perspective. These cheep WPs are designed pretty well for what they are. Cheap, solid, comfortable devices.
  • Rob, you're in the minority.  Look at the way the glass curves right into the frame on the iphone 6.  It is very seamless and smooth.  I agree the Lumia 830 needs the glass to do something similar.  But out of all the lumia choices I had.  This one did look the best.   Nothing on my Lumia feels flimsy.  I'm not sure if they had a different hardware revision when it was first released and they had updated it.  I've seen some people complain about it, but it is super solid for me.  It's definitely a great looking screen too.  Which is surprising given the resolution and size.  The clear black tech seems to help.   Anyways, if you look at my reply I still said the Lumia 830 is not that great but looks best out of all the ones I had an option to get.  The 930 looks nice in pictures and at least has rounded edges to match the glass, but it isn't sold here.  And I would have to see it in person.
  • This! I want one.
  • People love ugly phones, that's why the galaxy series did so well even while it was made of leftover plastic Easter egg material.
  • It'll never happen. MS love their bulky, heavy, plastic material, with huge bezels.
  • Well things are expected to change starting from this year with new mid range, new high end, new OS and fingers crossed :)
  • "things are expected to change starting from this year..." Something that has never been said about WP before /s
  • Pointing out it has been said before doesnt mean this time it wont catch on =). 
  • you familiar with the quote about the definition of insanity? 
  • Yep. But this isnt the same thing. The only thing that is the same is that its a Windows OS but the OS is different, the APIs are different, the idea to unify the apps across all platforms is different, etc, etc, etc, etc, etc. Hardly anything is the same this time around. Will it succeed, I dont know... But by saying Windows 10 will catch on for phones sounds the same as Windows 8 so therefore the OS is the same and therefore its going to fail is completely rubbish and illogical.  If you are tired of waiting or expecting it to succeed that i