REUTERS: 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 $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 rival Google Inc’s purchase of DoubleClick.
Microsoft said in a statement that “the acquisition did not accelerate growth to the degree anticipated, contributing to the write-down.”
The world’s largest software company bought aQuantive for $6.3 billion in cash in an attempt to catch rival Google Inc in the race for revenues from search-related advertising. It was Microsoft’s biggest acquisition at the time, exceeded only by its purchase of Skype for $8.5 billion last year. But 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 $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 $5.25 billion, or 62 cents 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.”