Microsoft reports first quarterly loss in 26 years, but analysts positive of future growth

Microsoft reports first quarterly loss in 26 years, but analysts positive of future growth

Palo Alto : CA : USA | Jul 20, 2012 at 6:40 AM PDT
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Microsoft records first quarterly loss in history - IG's Morning Market Headlines 20.07.12

Technology giant Microsoft Corp. has reported its first ever quarterly loss since going public 26 years ago. Nonetheless, Wall Street analysts remain positive of the company’s abilities to deliver better results in the future.

It should be noted that the software company warned two weeks ago that it was likely to take a $6.2 billion charge in its upcoming quarter because its purchase of aQuantive, an online ad service, failed to payoff as expected. The amount is reflective of the $6.3 billion Microsoft paid in 2007 to buy aQuantive to compete with Google.

Failure to turn around profits from the service has led to $492 million loss in the last three months. It is to be noted that before this loss, Microsoft had not delivered a single disappointing quarter since it joined the stock market in 1986.

With the entry of other rivals in the industry, the popularity of Microsoft's Windows operating system has seen a gradual decline over the years. Nonetheless, it has been able to stay strong in other areas such as server and tools business with Microsoft Business Division managing to beat analysts’ estimates.

"Microsoft's enterprise results remain extremely impressive - and guidance for the MBD and S&T business points to a solid outlook for the enterprise businesses in fiscal year 2013," Evercore Partners said, according to a report by Reuters.

J.P. Morgan Securities also sounded positive as it wrote in a note to clients, saying, "Over recent years, Microsoft has demonstrated that it can manage its operations appropriately and this quarter was a good example of that."

Following the J.P. Morgan statement, Microsoft shares have risen by 2.4 percent to $31.39, while revenues by 4 percent to $18.06 billion.

The future of Microsoft now hinges upon the October 26 release of Windows 8, which is being considered the most extreme redesign of the company’s operating system since 1995. The new operating system will not just feature a new look, but will also boost a technology compatible to work with touch-controlled tablet computers.

Chief Financial Officer for Microsoft Peter Klein told analysts that the revenues for Windows will be roughly in line with the PC market and will continue that way for another quarter, according to a report by MSN.

That should be considered an improvement given declining revenues of the company in the past seven quarters.

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Handout photo of Microsoft's Surface tablet.
Handout photo of Microsoft's Surface tablet.
Wendy Zachary is based in Texas, Texas, United States of America, and is a Reporter on Allvoices.
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