Microsoft Corp. (MSFT: Quote) said Thursday after the markets closed that it swung to a fourth quarter loss, hurt mainly by a hefty goodwill impairment charge related to its online services business and tied to the 2007 acquisition of aQuantive Inc.
However, the company's adjusted earnings per share handily beat analysts' estimate.
"The combination of solid revenue growth and rigorous cost discipline drove double-digit operating income growth for the quarter, adjusting for the goodwill impairment and deferred revenue," said Peter Klein, chief financial officer of Microsoft. "We are focusing our resources in strategic areas that will deliver shareholder value and long-term growth opportunities."
Microsoft shares are currently gaining 2.46% in after hours trading after closing the day's regular trading session at $30.67, up 22 cents. The shares trade in a 52-week range of $23.79 to $32.95.
Microsoft's two major divisions make the Windows operating system and Office business software. About 90% of the PCs around the world run on the company's windows operating system.
Last month, Microsoft unveiled its Windows-based tablet "Surface" in a bid to take on Apple Inc.'s (AAPL) hugely successful iPad.
Microsoft's business division revenue increased 7% year-over year to $6.29 billion in the fourth quarter, reflecting the continued strength of Office 2010. Earlier this week, the company announced the customer preview of the new Microsoft Office.
On June 25, Microsoft said its has agreed to buy Yammer, Inc., for $1.2 billion. The deal, which closed on July 18, will bring enterprise social networking features to Microsoft's existing communication and collaboration products.
Fourth quarter revenue from the company's windows and windows live division fell 13% to $4.62 billion. Excluding the impact of the Windows upgrade offer, the division's adjusted revenue declined 1%. This marks 5th time in the last 7 quarters that the division's revenue has declined year-over-year.
The next version of Windows, called Windows 8, will release to manufacturing next month and will become generally available on October 26.
The company estimates the overall PC market was roughly flat this quarter, with business PCs up 1% and consumer PCs down 2%.
The softness in the PC market has definitely hurt Windows sales. Earlier this month, two industry research firms International Data Corp. (IDC) and Gartner Inc. (IT) said that global PC shipments in the second quarter of 2012 were down 0.1% from last year, as the popularity of latest smartphones and media tablets continued to hit PC demand.
Server and tools division's revenue rose 13% to $5.09 billion in the fourth quarter, the ninth consecutive quarter of double-digit revenue growth, mainly driven by 22% growth in multi-year licensing revenue. Windows Server 2012 will be available this September.
Fourth quarter revenue from the company's entertainment and devices division surged 20% year-over-year to $1.78 billion, mainly due to the addition of Skype that was acquired in October 2011 for $8.5 billion.
Microsoft said it shipped 1.1 million Xbox 360 consoles during the fourth quarter, down from 1.7 million during the same period last year. However, Xbox 360 maintained its market share leadership position in the U.S.
The company said last month that the next version of its Windows Phone operating system will be based on the same core as the Windows PC operating system.
Online services division revenue for the quarter rose 8% year-over-year to $735 million, while the division's operating loss widened sharply to $6.67 billion from $745 million a year ago, mainly due to the $6.2 billion goodwill impairment charge.
For the fourth quarter ended June 30, 2012, the world's largest software company reported a net loss of $492 million or $0.06 per share, compared to net income of $5.87 billion or $0.69 per share for the year-ago quarter.
This marks Microsoft's first quarterly loss as a public company.
The latest quarter results include non-cash, non-tax-deductible income statement charge of $6.19 billion for the impairment of goodwill and the deferral of $540 million of revenue related to the Windows upgrade offer.
Excluding the goodwill impairment charge and the impact of deferred revenue, adjusted earnings for the latest quarter were $0.73 per share.
On average, 24 analysts polled by Thomson Reuters expected the company to earn $0.62 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Operating income for the fourth quarter dropped 97% to $192 million, but its adjusted operating income increased 12% to $6.93 billion.
Redmond, Washington-based Microsoft said revenue for the fourth quarter rose 4% to $18.06 billion from $17.37 billion in the same quarter last year. Excluding the deferred revenue, adjusted revenue for the fourth quarter grew 7% to $18.60 billion. Twenty-five analysts had a consensus revenue estimate of $18.13 billion for the fourth quarter.
Microsoft reaffirmed its fiscal year 2013 operating expense guidance of $30.3 billion to $30.9 billion.
The company stopped making specific profit or revenue forecasts in January 2009, citing market volatility.
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by RTT Staff Writer
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