$6.9 Billion profit? Not bad, not bad at all
Tonight Microsoft announced its Q4 results for fiscal 2012. Everywhere you turn, the media is writing about how the Redmond giant just reported its first loss ever. People writing these headlines are either clueless as to financial reporting, or in search of headline bait. But since everyone is doing it, it’s pretty crap headline bait.
So here’s the simple truth: Microsoft reported an extremely profitable quarter with respect to its regular operations. On top of this it also made the decision to write down the value of assets pertaining to a company it acquired back in 2007. The acquisition of aQuantive, a digital advertising company, didn’t contribute to Microsoft’s advertising platform as expected. When stuff like that happens, you write down the value of those assets on the balance sheet. The write down is a wave of the accounting magic wand. It does not represent a cash expense.