Microsoft's Ill-Fated Nokia Purchase Results In $2.1B Q4 Loss
Microsoft suffered one more black eye as it emerged from the Nokia debacle this week. The company’s Q4 earnings statement formally announced a $2.1 billion loss, the biggest in Microsoft’s history.
Driving that dramatic loss is the $7.5 billion impairment charge from Microsoft’s failed attempt to revive the Nokia phone business. Microsoft bought Nokia’s cell-phone component (as the latter company nose-dived) two years ago in a head-scratcher $7.2 billion deal. It subsequently released a string of mostly inexpensive phones that ran Windows software. The phones failed to take off in the numbers that Microsoft needed, leading to the massive write-down and an announcement early this month that Microsoft is cutting 7,800 jobs. Many of those positions are in Microsoft’s Nokia phone division.
If not for the Nokia loss and some restructuring costs, Microsoft believes that it would have had a fairly good quarter. It pegs the operating income (that it would have had) at $6.4 billion. Income from gaming hardware and Xbox-related sales are doing particularly well: Microsoft estimates that they brought in nearly $2 billion in revenue. Xbox revenue alone is up 27 percent.
“Our approach to investing in areas where we have differentiation and opportunity is paying off with Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online all growing by at least double-digits,” said Satya Nadella, CEO at Microsoft in a statement. “And the upcoming release of Windows 10 will create new opportunities for Microsoft and our ecosystem.”
The events leading up to this quarter’s loss may have bloodied Microsoft, but one has to imagine that employees who remain are breathing a collective sigh of relief. With Nokia behind it, Microsoft is free to look to the future, which includes the Windows 10 launch in the near term and, probably, some more measured mobile phone efforts down the road.
Driving that dramatic loss is the $7.5 billion impairment charge from Microsoft’s failed attempt to revive the Nokia phone business. Microsoft bought Nokia’s cell-phone component (as the latter company nose-dived) two years ago in a head-scratcher $7.2 billion deal. It subsequently released a string of mostly inexpensive phones that ran Windows software. The phones failed to take off in the numbers that Microsoft needed, leading to the massive write-down and an announcement early this month that Microsoft is cutting 7,800 jobs. Many of those positions are in Microsoft’s Nokia phone division.
If not for the Nokia loss and some restructuring costs, Microsoft believes that it would have had a fairly good quarter. It pegs the operating income (that it would have had) at $6.4 billion. Income from gaming hardware and Xbox-related sales are doing particularly well: Microsoft estimates that they brought in nearly $2 billion in revenue. Xbox revenue alone is up 27 percent.
“Our approach to investing in areas where we have differentiation and opportunity is paying off with Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online all growing by at least double-digits,” said Satya Nadella, CEO at Microsoft in a statement. “And the upcoming release of Windows 10 will create new opportunities for Microsoft and our ecosystem.”
The events leading up to this quarter’s loss may have bloodied Microsoft, but one has to imagine that employees who remain are breathing a collective sigh of relief. With Nokia behind it, Microsoft is free to look to the future, which includes the Windows 10 launch in the near term and, probably, some more measured mobile phone efforts down the road.
