Microsoft lost more money this quarter than Sony

[Baalzamon]

Landguy said:

Baalzamon said:

Landguy said:

Imaginedvl said:
First... it is a "write off" not a loss :)
And comparing Microsoft to Sony in any way on the financial stand point is literally comparing oranges and apples...

Agree with you.  Not sure how people could read the results and come to such innacurate conclusions as most have.  MS did not lose any $$$.  THey devlued an assett.  Simple as that.  3-4 years from now, they could do it again or value up parts of it in their reporting.  Nothing unusual about it.

Just to set the record straight for those here who clearly have no clue what writing off goodwill is. It most certainly IS a loss. Microsoft paid X billion dollars for Nokia, and a good portion of the acquisition went to the balance sheet account 'goodwill'. Now, Microsoft is saying that this balance sheet account, which they paid X billion dollars for, isn't actually worth X minus 7.4 billion dollars. In other words, $7.4 billion of money actually spent by Microsoft is worth absolutely nothing.

 

As a general rule, if you have no clue how GAAP accounting works (mandatory for SEC filings), you should probably avoid saying that a loss reported in GAAP isn't a true loss.

I appreciate your attempt to say exactly what I said with much more detail.  However, my point is exactly the same as yours.  MS devalued an asset.  Companies devalue large assets all the time in off peak quarters where they had otherwise quality results.  They do so to avoid scrutiny during other times.  Clearly, MS has decided to jettison the "husk" of the business that they bought from Nokia through layoffs and such.  But, what they bought and still have is an entrence into the smartphone hardware business and a retention of their presence in the mobile software biz.  Because those things can't be physically tracked, no value can be directly attributed to them.  The "husk" was thrown away and the cost wrote down.  The actual thing that they wanted they kept.  THe reason that the company's value is the same today as it was 2 weeks ago before the write down is that everyone knows what I just said.  They know that the husk had no real value.

You seem to struggle with the idea that devaluing goodwill isn't losing money. Goodwill is exactly what you described. The customers and non physical portions of an acquisition that you deemed to be worth more than the company initially had on the books (hence why you paid more). Microsoft has now determined that these non physical assets are not worth nearly as much.

You can't just pull the number out of your ass...you would have to have extremely detailed calculations (most likely relating to expected future returns) to detail to the auditors why it is worth that much less. This number would most likely need to be within about $50 million to be materially correct for a company the size of Microsoft.

To just do it purely for offsetting a good quarter as you speak would likely be considered fraud. The reality is, the asset isn't worth what they initially thought it was (i.e. they lost money). Now, could they have probably justified doing this last quarter, or the quarter before? Sure, but these non physical assets that you say can't be valued most certainly can be.

Microsoft not losing a substantial amount of the share value most likely has a lot more to do with the fact that a lot of its value was likely on cash flows and income, which cash flows will still be fine this quarter, and income was still fine without the write off (which wont happen again next quarter).