Microsoft will take a non-cash, non-tax-deductible income statement charge for the fourth quarter of fiscal year 2012 for the impairment of goodwill in its Online Services Division segment, mostly related to its 2007 aQuantive, Inc., acquisition.
Microsoft is playing good news bad news game. Yesterday Microsoft announced that Windows 8 upgrades will only cost $39.99. This is big as it will help build up the Windows 8 eco-system much quicker. Later yesterday, Microsoft announced a big accounting charge for their failed aQuantive acquisition.
Under accounting guidelines, companies are required to conduct an annual goodwill impairment test for each business unit. Goodwill arises in an acquisition when the fair value paid for a business exceeds the value of the identifiable net assets. The goodwill in the Online Services Division was substantially the result of the 2007 acquisition of aQuantive. As a result of its 2012 impairment review, Microsoft has determined that a write down of its Online Services Division goodwill of approximately $6.2 billion is required.
Microsoft completed its acquisition of aQuantive on Aug. 13, 2007, in an all-cash transaction valued at just over $6.3 billion. While the aQuantive acquisition continues to provide tools for Microsoft’s online advertising efforts, the acquisition did not accelerate growth to the degree anticipated, contributing to the write down.
Microsoft does not expect this accounting write down to affect its ongoing business or financial performance. Let's see what the stock market thinks about this today.
Bing search share in the U.S. has been increasing, revenue per search (RPS) has been growing, MSN is the No. 1 portal in 29 markets worldwide and the company’s partnership with Yahoo! has continued to expand geographically. While the Online Services Division business has been improving, the company’s expectations for future growth and profitability are lower than previous estimates.