14 DAY TRIAL // On Monday, Redmond-based software giant Microsoft announced that it would take a non-cash, non-tax-deductible write-down of $6.2 billion for the impairment of goodwill in its Online Services Division segment.
The income statement charge will be taken for the fourth quarter of fiscal year 2012, and is related to the 2007 aQuantive, Inc. acquisition.
“Under accounting guidelines, companies are required to conduct an annual goodwill impairment test for each business unit,” Microsoft explains.
“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.”
The company notes that, following the 2012 impairment review, it decided that it needs to take a write-down of its Online Services Division goodwill of approximately $6.2 billion.
Microsoft also explains that its Online Services Division has showed steady growth lately, but that its expectations for future growth are now lower than before.
Microsoft’s Bing search services have been experiencing market share growth in the United States, while revenue per search (RPS) has been increasing.
Moreover, the company notes that its MSN service is the leading portal in around 29 markets all around the world, and that the partnership it signed with Yahoo! has been expanding geographically.
Microsoft started the acquisition of aQuantive in May 2007, in an attempt to better position itself on the search market against archrival Google. The software giant completed the purchase on August 13th, 2007, in an all-cash transaction of over $6.3 billion in value.
“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 notes.
The Redmond-based company also notes that the write-down should not affect its ongoing business or financial performance.