Microsoft posts first loss in its history

Jul 20, 2012

$492m loss put down to slashed value of online advertising business, but there are signs Apple competition is harming profits

COMPUTER giant Microsoft has posted its first quarterly loss since becoming a public company over two decades ago after cutting the value of its online advertising business.

Microsoft made a $492m loss in the three months leading to June, compared to a $5.9bn profit during the same period last year.

That figure can be explained by a $6.2 billion cut to the value of aQuantive, a company Microsoft took over in an ill-fated move in 2007. The acquisition has struggled to compete with Google and failed to make the profits that were expected.

While the company dismissed the loss as a one-off, there were other signs that the challenge of competing with Apple is impacting Microsoft's profits.

As the New York Times points out, revenue from Windows, the company's reliable moneymaker for decades, fell by 13 per cent in the last quarter. Even taking into account the decision to defer $540m worth of sales till next quarter, revenue from Windows revenue still shrunk.

The figures reflect the backdrop of rapidly changing consumer behaviour. The PC market, the staple of computing for so long, has become stagnant as consumers turn to new technologies like tablets and smartphones.

Here Apple leads the way. The success of the iPad has convinced Microsoft to design and sell its own tablet computer, named Surface, while the company is attempting to grow its share in the smartphone market, an area currently dominated by the iPhone, by linking up with troubled Nokia.

Peter Klein, Microsoft's chief financial officer, pointed out that there were encouraging signs for the company's mobile business, with sales of handsets running their operating system jumping more than 50 per cent between the first and second quarter of this year.

As for the PC market, Klein admitted sales among consumers remain weak, but hoped the launch of Windows 8 could boost demand. "We're pretty encouraged by the impact that can have," he said.

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