Microsoft Reports A $2.1B Q4 Loss

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Microsoft Corp. today announced that revenues for the quarter ended June 30, 2015 were $22.2 billion. Gross margin, operating loss, and loss per share for the quarter were $14.7 billion, $(2.1) billion, and $(0.40) per share, respectively. These results include the impact of a $7.5 billion non-cash impairment charge related to assets associated with the acquisition of the Nokia Devices and Services (NDS) business, in addition to a restructuring charge of $780 million. There was also a charge of $160 million related to the previously announced integration and restructuring plan. Combined, these items totaled $8.4 billion or a $1.02 per share negative impact. Excluding this impact, operating income and EPS would have been $6.4 billion and $0.62, respectively. During the quarter, Microsoft returned $6.7 billion to shareholders in the form of share repurchases and dividends.
 

cyclone3d

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So it wasn't really a loss then.

They purchased some Nokia stuff and also did a stock buy-back.

When you go out and buy stuff, do you record it as a loss?
 

pxc

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Nokia was purchased for $7.2 billion, so this counts as mega fail. Bad strategy, Ballmer, bad.
 

Shmee

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On the bright side for MS the loss is due to a write-down, so they gained about $4 Billion in cash. Yeah for past losses!
 

jonathonball

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I may be way off here, but it seems to be that $2B is a drop in the bucket for Microsoft. That combined with the fact that attitudes towards Windows 10 are generally warm, they'll be just fine.
 

heatlesssun

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Nokia was purchased for $7.2 billion, so this counts as mega fail. Bad strategy, Ballmer, bad.

If Microsoft wanted to stay in the phone market it had to buy Nokia. It can be argued that Microsoft shouldn't be in the phone market, at least not with its own OS and devices given the lack of success they've had. But for now it's too important a market to ignore and while Microsoft may never be a major player in mobile clients with the right strategy and tactics it should at least be able to break even or make a little profit.

I think this firmly marks the beginning of the Nadella era at Microsoft. He's had enough time and made enough big decisions to have made his mark and transition out of the Ballmer era.

The next big and most important test to date for Nadella starts next week with the launch of Windows 10. However that goes all the credit or blame will be firmly under his watch.
 

Exavior

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I may be way off here, but it seems to be that $2B is a drop in the bucket for Microsoft. That combined with the fact that attitudes towards Windows 10 are generally warm, they'll be just fine.

Yeah, they will be fine. This isn't a real loss, but just a loss as far as books say. Kind of like how every movie every made has lost money.
 

pxc

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If Microsoft wanted to stay in the phone market it had to buy Nokia.
No, MS was trying to expand its phone market share by purchasing Nokia's phone business. Windows Phone share was growing at the time of the Nokia devices and services unit purchase. The purchase was part of Ballmer's devices and services strategy where he thought he could turn MS into Apple, at least as far as consumer devices. Delusional? Probably. A risky gamble? Definitely. And it went bust. No surprise.

The real concern for MS investors/apologists like yourself should be to ask why every new venture MS touches, outside of cloud services, turns to crap.
 

heatlesssun

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No, MS was trying to expand its phone market share by purchasing Nokia's phone business. Windows Phone share was growing at the time of the Nokia devices and services unit purchase. The purchase was part of Ballmer's devices and services strategy where he thought he could turn MS into Apple, at least as far as consumer devices. Delusional? Probably. A risky gamble? Definitely. And it went bust. No surprise.

The real concern for MS investors/apologists like yourself should be to ask why every new venture MS touches, outside of cloud services, turns to crap.

90% of the Windous Phone market are Lumia devices so I don't see how without Nokia there'd be any kind of Windows Phone market such that it is anyway.

Apologizing for what? Without Nokia there'd be no Windows Phones and I made the point that many think Microsoft shouldn't even be in the phone market and that the long term future of Windows phones is in serious doubt. Don't know how pointing out the facts and the precarious situation of Windows phones is apologizing for anything.
 

CreepyUncleGoogle

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No, MS was trying to expand its phone market share by purchasing Nokia's phone business. Windows Phone share was growing at the time of the Nokia devices and services unit purchase. The purchase was part of Ballmer's devices and services strategy where he thought he could turn MS into Apple, at least as far as consumer devices. Delusional? Probably. A risky gamble? Definitely. And it went bust. No surprise.

The real concern for MS investors/apologists like yourself should be to ask why every new venture MS touches, outside of cloud services, turns to crap.

Had MS not purchased Nokia and secured a hardware vendor to sell its phone OS, it's possible that Nokia would have eventually gone with Android instead after losing on Windows phones. So yeah, despite heatlesssun's being really well known for having a pair of Microsoft pom-poms in his closet, he's got a point. In order to have a meaningful presence in the phone market with Windows Phone, they did take what was probably one of only a few choices that looked reasonable at the time.
 

pxc

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Had MS not purchased Nokia and secured a hardware vendor to sell its phone OS, it's possible that Nokia would have eventually gone with Android instead after losing on Windows phones. So yeah, despite heatlesssun's being really well known for having a pair of Microsoft pom-poms in his closet, he's got a point. In order to have a meaningful presence in the phone market with Windows Phone, they did take what was probably one of only a few choices that looked reasonable at the time.
There's another school of thought about going vertical, that it discourages adoption by other companies that now have to complete with the vertical integrator*. This was borne out by the shrinkage of Windows Phone share after the Nokia phone unit purchase.

Even Nokia's pre-purchase interest in Windows Phone was suspect: it was a decision made by the CEO, an ex-MS executive, and didn't trend with interest by other large phone makers.

* that is also the "new" strategy at MS: many Windows Phone makers. :p
 

CreepyUncleGoogle

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There's another school of thought about going vertical, that it discourages adoption by other companies that now have to complete with the vertical integrator*. This was borne out by the shrinkage of Windows Phone share after the Nokia phone unit purchase.

Even Nokia's pre-purchase interest in Windows Phone was suspect: it was a decision made by the CEO, an ex-MS executive, and didn't trend with interest by other large phone makers.

* that is also the "new" strategy at MS: many Windows Phone makers. :p

I totally agree that the Nokia purchase was a dumb idea, but that's in hindsight and MS people might not have seen this as a possible end or did anticipate it but found the potential losses an acceptable risk. I was sorta thinking in the manner that they may have been at the time they decided to acquire Nokia. OFC, people here on [H] even correctly predicted it was a stupid move and the losses speak for themselves.

I just wanted to say that, in his own way, our resident paid-for MS forum resident isn't totally off and I don't think he's even being very apologetic about the stuff they're doing these days since he's not a fan of Win10's shift away from a tablet-friendly interface. :D
 

heatlesssun

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There's another school of thought about going vertical, that it discourages adoption by other companies that now have to complete with the vertical integrator*. This was borne out by the shrinkage of Windows Phone share after the Nokia phone unit purchase.

Even Nokia's pre-purchase interest in Windows Phone was suspect: it was a decision made by the CEO, an ex-MS executive, and didn't trend with interest by other large phone makers.

* that is also the "new" strategy at MS: many Windows Phone makers. :p

Obviously Microsoft has made of tons of mistakes in the phone market. But under current circumstances if Microsoft doesn't make Windows phones it's clear that no one else is going to. Indeed how would Microsoft giving up on first party phones now be any encouragement for 3rd parties to get involved? If Microsoft gave up that would be the end of Windows phone then and there.

Of course Microsoft would love for 3rd parties to make tons of Windows phones and maybe getting into phones was a mistake. But that's the situation that Nadella inherited and I think he's doing the only thing that he can reasonably do at this point, short of dumping handsets altogether which I just don't think is viable or even necessary. Microsoft needs a phone presence and I think that can be achieved profitably even if it's not a large presence. I think that's Nadella's assessment of the situation thus this write down and scaling back on numbers of different devices and markets.

It's very possible that this won't work and that the financial drag on phones will eventually force Microsoft out of at least their own phone hardware/OS products. The situation is in serious doubt and there are no quick fixes. There many not be any fixes at all.
 

DPI

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So in the end, all that Microsoft accomplished in losing 7.6 Billion to burn down NOKIA was ensuring Samsung would remain king of the Android hill by not having to compete with an Android focused NOKIA. Did fuckall for Winphone's marketshare.
 

BryanSTG

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Maybe Microsoft should stop constantly bailing on and canceling their phone ventures. I used several PPC and Windows Mobile phones in the past and used to love them. However, given their smartphone track record, I am quite certain Windows Phone 8.x and 10.x (once released) will fail and be cancelled in the near future. Why would anyone continue to trust them or buy anything MS branded?

Every single one of these is dead and useless now.

PPC Phones
Windows Mobile
Kin
Windows Phone 7.x
Windows Phone 8.x (VERY soon)
 

MostComfortable

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So it wasn't really a loss then.

They purchased some Nokia stuff and also did a stock buy-back.

When you go out and buy stuff, do you record it as a loss?

Yes, it counts as a writeoff.

Its a loss in any case, on top of $10 billion loss on Zune, $4 billion loss on XBox, and on and on.

Anything outside of word processors and operating systems is a guaranteed loss for MS.
 

heatlesssun

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Yes, it counts as a writeoff.

Its a loss in any case, on top of $10 billion loss on Zune, $4 billion loss on XBox, and on and on.

Anything outside of word processors and operating systems is a guaranteed loss for MS.

$10 billion loss on Zune? Not sure how that's even possible. At any rate while a goodwill write-down while not a good thing especially at this size, it would be MUCH worse if this were a $2.1 billion dollar loss due to negative cash flow. Since 1986 when Microsoft became a public company it has only had two quarterly losses, the one two years ago and this one. Both goodwill write-downs and in neither case was it a negative cash flow loss. So for 116 consecutive quarters, Microsoft has never actually lost money. That's remarkable especially for a company that some think is about to go out of business.

And Microsoft is finding other ways to make money outside of its historical core businesses. Their cloud business is booming. Surface is beginning to bring in steady income though given the $1 billion write-down of that plus the initial investment may take a few more years to be really in the black.

Microsoft certainly doesn't have its work cut out for it and there's plenty of challenges they have to deal with but with a $100 billion in cash and a business that's close to bringing in $100 billion a year in revenue and that bought in $19 billion in profit alone this year even with this write-down, they are far from dead.
 

MostComfortable

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Whoops, I meant a total $10 billion loss on BING, my bad!

Again, it doesn't matter how much they lose competing with Apple, Google, and Sony, they can fund endless profitless ventures as long as Windows and Office pays for the whole party.
 

DPI

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Again, it doesn't matter how much they lose competing with Apple, Google, and Sony, they can fund endless profitless ventures as long as Windows and Office pays for the whole party.

Shareholders will have something to say about that first.
 

jnemesh

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If Microsoft wanted to stay in the phone market it had to buy Nokia. It can be argued that Microsoft shouldn't be in the phone market, at least not with its own OS and devices given the lack of success they've had. But for now it's too important a market to ignore and while Microsoft may never be a major player in mobile clients with the right strategy and tactics it should at least be able to break even or make a little profit.

I think this firmly marks the beginning of the Nadella era at Microsoft. He's had enough time and made enough big decisions to have made his mark and transition out of the Ballmer era.

The next big and most important test to date for Nadella starts next week with the launch of Windows 10. However that goes all the credit or blame will be firmly under his watch.

It really doesn't matter if they ignore it or not...actually it probably would have been better if they DID ignore it. Yes, it's an important market, and yes, MS needs to be a player in phones and tablets to remain relevant at all...but their efforts so far have been wasted, and have cost them BILLIONS. For what? a 3% market share? Nice.
 

jnemesh

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Shareholders will have something to say about that first.

Yup, and Windows and Office are mainly successful because of Windows 7...Windows 8 has flopped hard, peaking at less than 20% adoption, and Windows 10, so far, seems to be a bad joke.
 

sfsuphysics

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So it wasn't really a loss then.

They purchased some Nokia stuff and also did a stock buy-back.

When you go out and buy stuff, do you record it as a loss?
Welcome to the world of corporate tax manipulation, this is why you see articles about how company XXX who made over X billion dollars didn't pay any taxes.

And yeah, you or I buy a new car to help with our "business" (aka the job we drive to every day) then we don't get to count that against the money we make from said job. Only if you actually own a business could you possible write that off.
 

jnemesh

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So it wasn't really a loss then.

They purchased some Nokia stuff and also did a stock buy-back.

When you go out and buy stuff, do you record it as a loss?

No, it's really a loss. The dumped billions into something that has ZERO chance of returning their investment. Money is GONE, no matter how you slice it on the earnings report.
 

heatlesssun

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No, it's really a loss. The dumped billions into something that has ZERO chance of returning their investment. Money is GONE, no matter how you slice it on the earnings report.

The money was already gone. The value of the asset that money purchased is also now gone. It's still not at all the same thing as negative cash flow where you have to tap into reserves to pay the bills.
 
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