Microsoft Corp admitted its largest acquisition in the Internet sector was effectively worthless and wiped out any profit for the last quarter, as it announced a US$6.2 billion charge to write down the value of an online advertising agency it bought five years ago.
The announcement came as a surprise, but did not shock investors, who had largely forgotten Microsoft’s purchase of aQuantive in 2007, which was initially expected to boost Microsoft’s online advertising revenue and counter rival Google Inc’s purchase of digital ad firm DoubleClick.
Microsoft’s shares dipped slightly to US$30.28 in after-hours trading, after closing at US$30.56 in regular NASDAQ trading.
The world’s largest software company said in a statement that “the acquisition did not accelerate growth to the degree anticipated, contributing to the write-down.”
Microsoft bought aQuantive for US$6.3 billion in cash in an attempt to catch rival Google Inc in the race for revenues from search-related display advertising. It was Microsoft’s biggest acquisition at the time, exceeded only by its purchase of Skype for US$8.5 billion last year. However, it never proved a success and aQuantive’s top executives soon left Microsoft.
As a result of its annual assessment of goodwill — the amount paid for a company above its net assets — Microsoft said on Monday it would take a non-cash charge of US$6.2 billion, indicating the aQuantive acquisition is now worthless.
The charge will likely wipe out any profit for the company’s fiscal fourth quarter. Wall Street was expecting Microsoft to report fiscal fourth-quarter net profit of about US$5.25 billion, or US$0.62 a share, on July 19.
In addition to the write-down, Microsoft said its expectations for future growth and profitability at its online services unit — which includes the Bing search engine and MSN Internet portal — are “lower than previous estimates.”
The company did not say what those previous estimates were, as it does not publish financial forecasts. Microsoft’s online services division is the biggest drag on its earnings, currently losing about US$500 million a quarter as the company invests heavily in Bing in an attempt to catch market leader Google. The unit has lost more than US$5 billion in the last three years alone. Even though its market share has been rising, Bing has not reached the critical mass required to make the product profitable.
Before rolling out Bing in June 2009, Microsoft’s Windows search engine had 8 percent of the US Internet search market, compared with Yahoo’s 20 percent and Google’s 65 percent.
In the three years since then, Bing has almost doubled its market share to 15 percent, but that has been mostly at the expense of Yahoo, which has had its share whittled down to 13 percent. Google now has almost 67 percent, according to research firm Comscore.
NEW MARKET: The partnership opens up India to the Dutch company, which already has a strong hold in the semiconductor market of South Korea, Taiwan and China ASML Holding NV entered into a partnership agreement with Tata Electronics Pvt Ltd aimed at ramping up India’s goal to develop domestic chip-manufacturing capabilities. The Dutch company’s technology would help power Tata Electronics’ planned 300 millimeter (mm) semiconductor foundry in Gujarat, according to a joint statement from the two companies on Saturday. The signing of a memorandum of understanding coincides with a visit by Indian Prime Minister Narendra Modi to the Netherlands, which is looking to deepen bilateral relations with New Delhi. ASML, whose top customers include Taiwan Semiconductor Manufacturing Co (台積電) and Samsung Electronics Co, makes lithography machines that can print
PORTFOLIO REBALANCING: The adjustments in three global equity indices reflect rising investor appetite for semiconductor and artificial intelligence-related stocks Taiwan’s weighting in major global equity indices compiled by MSCI Inc is to rise modestly following the latest quarterly review, underscoring the market’s expanding role in emerging-market portfolios, as global investors continue to favor the nation’s technology sector. Taiwan’s weighting in the MSCI Emerging Markets Index is to increase by 0.30 percentage points to 23.76 percent, after the changes take effect at the close of the May 29 session. Its weighting in the MSCI All-Country Asia ex-Japan Index is to rise 0.37 percentage points to 27.16 percent, while that in the MSCI All Country World Index is to edge up slightly to
The Hsinchu County Government’s Labor Affairs Department yesterday said that it has received a plan from cosmetics brand Taiwan Shiseido Co (台灣資生堂) detailing mass layoffs at its plant in Hukou Township (湖口). While the labor authorities did not disclose the number of employees to be laid off, Japanese news media earlier in the day reported that the closure of the company’s factory in Hukou would result in 170 employees losing their jobs. Shiseido followed the law by reporting its layoff plan, the department said, adding that authorities would closely monitor negotiations between the management and affected employees and step in if any
Hon Hai Precision Industry Co (鴻海精密) on Tuesday confirmed a cyberattack targeting some of its North American facilities, but said the affected factories were gradually returning to normal. The company, known globally as Foxconn Technology Group (富士康科技集團), said that its cybersecurity team “activated the response mechanism and implemented operational measures to ensure the continuity of production and delivery.” “The affected factories are resuming normal production,” the company said in a statement. Hon Hai had previously described it as a “technical issue,” when news of the cyberattack first surfaced. The confirmation followed media reports of a large-scale information technology system incident that broke out at
RSS