Google flies as Microsoft posts loss

Microsoft has posted its first quarterly loss after the acquisition of an advertising business failed to pay off and keep pace with Google, which in the same quarter has reported an 11% jump in profit.

Google

The $6.3bn (£4bn) purchase of online ad service aQuantive in 2007 has failed to yield the profits expected by Microsoft’s management. The software company took a $6.2bn (£3.9bn) charge due to the decline in value of the asset.

It resulted in a $492m (£313m) loss fo Microsoft in the three months to 30 June, compared with a profit of $5.9bn (£3.8bn) the previous year.

Despite the charge, Microsoft posted record fourth quarter revenue, which was up 4% year on year to $18bn (£11.5bn). For the financial year, revenues reached a record $73.7bn (£47bn).

The company performed particularly well in its entertainment and devices division, which grew 20% in revenue year on year. This reflects the addition of Skype to its assets and the continuing strong performance of its Xbox gaming franchise.

Microsoft’s future fortunes rely on the success of its Windows 8 operating system, which is due to be released in October and will power the company’s first tablet device, Surface.

Steve Ballmer, Microsoft CEO, says: “Over the coming year, we’ll release the next versions of Windows, Office, Windows Server, Windows Phone, and many other products and services that will drive our business forward and provide unprecedented opportunity to our customers and partners.”

Meanwhile, rival Google reported an 11% increase in profit quarter on quarter to $2.8bn (£1.8bn). Revenue rose 35% year on year to $12.2bn (£7.8bn) overall, while UK revenues rose 11% to $1.2bn (£764m) in the same period.

Paid click volume, which represents the popularity of Google’s advertising offer, rose 42% year on year. Volume increased just 1% quarter on quarter, reflecting the current adverse macroeconomic conditions and the increasing use of the mobile internet, which currently yields cheaper ad rates.

Cost per click decreased 16% year on year, but was up 1% on the previous quarter.

Larry Page, Google CEO, says: “Google standalone had a strong quarter with 21% year on year revenue growth, and we launched a bunch of exciting new products at I/O – in particular the Nexus 7 tablet, which has received rave reviews. This quarter is also special because Motorola is now part of the Google family, and we’re excited about the potential to build great devices for users.”

The company did not offer further details on how it plans to build out its hardware offer following the Motorola acquisition in May.

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