Microsoft Corp. (NASDAQ: MSFT) will book $6.2 billion impairment charge in connection to its money losing internet division, which includes Bing services and aQunative –which it acquired in 2007 for $6.3 billion in all cash deal.
The Company admitted that acquiring the new business could not live up to the expectations even as it struggled to catch up with its rivals like Google in online business.
This is a big blow to Microsoft’s CEO, Steve Ballmer, who invested billions of dollars in last decade, hoping to build a web unit which could challenge Google’s (NASDAQ: GOOG) dominance in selling online ads and providing instant search results.
Despite forging an alliance with Yahoo (NASDAQ: YHOO), and spending heavily on Bing Search engine services, Microsoft failed to dent the Google’s domination. Unlike Google, which is able to sell online ads for higher prices, Microsoft business was hurt as it struggled to fetch the same prices.
The Company said that its online business was in no position to grow quickly or even turn profitable as it was initially forecasted; and hence, it was left with no option but to book a $6.2 billion charge.
In a statement to investors, Microsoft said, “While the Online Services Division business has been improving, the company’s expectations for future growth and profitability are lower than previous estimates.”
According to Street’s estimates, the massive impairment charge would wipe out Software giant’s fiscal fourth quarter –which ended on June 30.
Lately, investors have been vociferous about Microsoft mounting losses from its online services division. Consequently, Microsoft started focusing on cutting costs at Bing and other Web businesses; nevertheless, losses continued. In the fiscal first three quarters that ended March 31, the online-services division had an operating loss of $1.45 billion on revenue of $2.1 billion, or 3.8% of the company’s total.
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Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.