Microsoft cuts growth forecast after $6.2bn writedown

Microsoft Corp ratcheted back growth expectations for its internet and search engine unit last night as it took a $6.2bn writedown on the value of an online advertising company it bought five years ago.

The charge will likely wipe out any profit for the company’s fiscal fourth quarter, the results of which are expected this month.

Microsoft bought the internet advertising company aQuantive in 2007 in an attempt to catch rival Google Inc in the race for revenues from search-related advertising.

The $6.3bn deal was Microsoft’s biggest at the time, but it never proved a success. As a result of its annual assessment of goodwill — the amount paid for a company above its net assets — Microsoft said it would take a non-cash charge of $6.2bn, effectively indicating that the aQuantive acquisition is now worthless.

“The acquisition did not accelerate growth to the degree anticipated, contributing to the writedown,” Microsoft said in a statement.

In addition to the writedown, Microsoft said its expectations for future growth and profitability at its online services unit, which includes the Bing search engine and MSN Internet portal, are “lower than previous estimates”.

The company did not clarify what those previous estimates were, as it does not publish financial forecasts.

It came only weeks after Microsoft revealed that its new phone software will be built on the same core as its new upcoming PC and tablet operating system, bringing the company one step closer to unifying its Windows franchise across a full range of screens that are revolutionising computing.

The world’s largest software company, which is running to keep up with Apple’s iPhone and Google’s Android devices, said the common core meant customers would have a greater choice of phones and applications, and be able to switch between multiple machines more easily.

It launched a tablet computer, Surface, in June, Microsoft’s effort to join the fast-growing mobile computing market and to tackle Apple’s iPad head on.

Meanwhile, Microsoft’s phones will feature voice commands, Skype calling, near-field communication (NFC) for wireless transactions and built-in maps for GPS directions. Microsoft’s voice recognition feature goes beyond Apple’s rival Siri service.