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:; Via: Computerworld

John Callaham