Microsoft lost more money this quarter than Sony

[Landguy]

Baalzamon said:

Landguy said:

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).

We are still saying the same thing.  I guess I need to clarify one of my original comments.  The difference here is that MS wrote down the "today" value of this asset.  Knowing that if Win10 mobile and related products take off over time, the value will return.  MS moves assets and divisions left and right all the time to hide underperforming units.  If you think that is fraud, then you better not look to deep into the accounting of almost any company large or small.  Writing down the value of an asset does not cost them cash, only value.  They spent the cash last year, and it was spent or lost then. They can recover value later if or when the asset performs differently.  By changing the basis for the asset to a much lower number, it is easier for them to sell it or even show its greater value later as a gain.