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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

July 2, 2012 at 1:57 PM

Microsoft takes $6.2 billion writedown for aQuantive acquisition

[This post has been updated with more background and context.]

Microsoft is taking a $6.2 billion charge for its fiscal fourth quarter in its Online Services division, mostly related to its 2007 aQuantive acquisition.

The amount of the writedown is large enough that it could dramatically affect — or even wipe out — whatever profit Microsoft reports in its fourth quarter earnings. Wall Street analysts had been expecting Microsoft to report about $5.2 billion to $5.3 billion in profit for the fourth quarter. (Microsoft reports its fourth quarter earnings on July 19.)

Microsoft has not reported a quarterly net loss in at least the past decade.

Microsoft purchased aQuantive, a digital holding company that included digital ad agency Razorfish, for $6.3 billion in cash, Microsoft’s largest acquisition at the time. (It was surpassed by the $8.5 billion Skype acquisition in 2011.)

“While the aQuantive acquisition continues to provide tools for Microsoft’s online advertising efforts, the acquisition did not accelerate growth to the degree anticipated, contributing to the write down,” Microsoft said in a news release.

The amount of the writedown is no chump change, even for Microsoft. For comparison’s sake, Microsoft reported a $5.11 billion profit in 3Q 2012. The company reported profits of $5.9 billion in 4Q 2011, and $4.5 billion in 4Q 2010.

When Microsoft purchased Seattle-based aQuantive five years ago, the hope was that it would provide key tools and technologies, and ties with clients Microsoft didn’t have at the time, in order to boost the software giant’s online advertising revenue.

At the time, aQuantive was known for creating top-to-bottom digital advertising services, including creating ad campaigns, placing or serving ads on Web sites, and tracking the behavior of those who clicked on those ads as they surfed the Web.

Microsoft on Monday touted Bing’s search share increase in the U.S. and said revenue per search has been growing. But the business simply hasn’t been growing fast enough.

“While the Online Services Division business has been improving, the company’s expectations for future growth and profitability are lower than previous estimates,” Microsoft said in its news release.

The division continues to lose money, including $479 million in Microsoft’s third quarter this fiscal year. Since it bought aQuantive, the division has reported losses totaling nearly $9 billion, according to The Associated Press.



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