Chalk up aQuantive as another bad Microsoft buy

Chalk up aQuantive as another bad Microsoft buy

Summary: Microsoft's Online Services Division is taking a $6.2 billion goodwill charge for its fiscal 2012 fourth quarter that is largely attributable to aQuantive.

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Microsoft is taking a $6.2 billion write-down in its fiscal 2012 fourth quarter (which ended on June 30) largely connected with its 2007 acquisition of digtal-advertising agency aQuantive.

aquantiveadvertising

This is a "non-cash, non-tax-deductible income statement charge" to its already money-losing Online Services Division, according to a July 2 press release.

Remember aQuantive, the company Microsoft bought five years ago for $6 billion? (It was Microsoft's biggest acquisition ever, at that time.) Microsoft had high hopes for aQuantive back then, with some execs going so far as to claim the purchase was more like a "merger" than a traditional acquisition.

aQuantive used to be known, back in the dot-com heyday years, as "Avenue A." The digital consultancy Razorfish ultimately became part of the firm before Microsoft snapped up the company, hoping to parlay aQuantive's ad savvy into dollars.

Instead, things went badly on the Microsoft online-ad front.

The former aQuantive CEO Brian McAndrews jumped ship a year after the Microsoft acquisition. In 2009, Microsoft sold off Razorfish (for $530 million).

Microsoft ended up doing another search/ad-focused deal in 2010 with Yahoo -- deciding in the eleventh hour against buying that company. There've been problems with that partnership around Microsoft being able to deliver the revenues guaranteed and anticipated.

To top it all off, in 2011, Microsoft ended up retiring the ad-exchange platform it bought in 2007 when it purchased AdECN.

(Is anyone still wondering why the Softies got acquisition-shy?)

Last quarter, Microsoft's Online Services Division, the home of Bing and its online ad technologies, lost $480 million (which was actually $300 million less than the comparable previous quarter).

Microsoft is set to report its fourth quarter fiscal 2012 earnings on July 19.

Topics: Tech Industry, Microsoft

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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9 comments
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  • OSD is a raging cash bonfire

    $16 billion is a lot of money to spend on a grudge. When will it end?
    symbolset
  • The real problem is Microsoft has no Internet market share

    Microsoft, either due to antitrust troubles or due to bad business decisions, refused to step into the internet search engine technology and business market at the right time, circa 2000. That was when Excite/Lycos/Yahoo/MSN/AOL etc were at the top of their game and the stock market was in a spin related to the dotcom boom and telecom boom. Both busted eventually. And dusted off too - it was actually a nuclear winter that followed the bust if anyone remembers.

    That misstep of not taking the internet search market seriously with home grown technology is the real reason Microsoft is left saddled with two oldies - Hotmail (should have been Hotmale) that was hot for a few years and never later while MSN which is still homegrown and is still an granpa brand like AOL. Atleast the brands survived unlike AOL portal or AOLmail. Wasnt it called 'You have got mail'? Right.

    Then came Live Search. Tada. Meet the new kid. Same as the old kid. It was just their old Inktomi and Looksmart results dressed up as new directory listings and new search engine in 2006.

    Then came Bing. Tada. Meet the new man. Same as the old man. Atleast they rewrote their search engine code. Added smarter web crawler. Added some PowerSet technology. Which I guess it did not work. What worked was infusion of talent from Yahoo search partnership. Unfortunately, there is still no money made on that partnership while Yahoo is dying. Or should I declare Yahoo dead? Say hello to my little dead friend - Yahoo.

    Please and please - to Microsoft - please do the following and save us money from that never-ending sinkhole on your rear:
    #1 Sell Bing
    #2 Sell MSN like you did with Expedia
    #3 Sell AdECN
    #4 Sell your other online properties

    Please do nothing with the Internet market - it is one giant mega-monopolistic market with only four profitable enterprises: Amazon (ecommerce), Google (advertizing), Ebay (ecommerce/efinance), Facebook(social).

    Like Apple, you are not welcome into the Internet market. Please exit it and have partnerships. Like Apple.
    calahan
    • Wrong pal

      Hey MSN is my home page and that of most people I know. Also use Bing exclusively. Not sure what adECN is however.
      ClickHouse
  • They tend to walk halfway into the forest...

    Yet, never figure out how to walk the remaining half, out.
    TechNickle
  • That's a lot of money

    How in gods name do you walk away writing off $6Billion!?

    That would be enough to guarantee a third place in the smartphone market and 2nd in tablets!!!

    Those initiatives are now going to suffer because of this sink hole.
    AS147
    • The cash was burned a half decade ago...

      ...Now they are just making sure that they are recognizing it properly.
      Flydog57
  • NEWS FLASH

    The CIO is long gone now! Could it be time for a new CEO?
    There goes 10% of the cash on hand..now we must pay out EU fines of billions..and invest in phones that are not selling. HMNN?
    CustomComputers
    • The cash is already gone

      This isn't a cash charge. The cash was spent years ago. This is just a book keeping admission that the thing they bought now has no value. There's no change to the company cash position due to this at all.
      Tridus
  • Online Services

    Gracious 6B is incredible amount of $$. Cannot believe they could simply just throw that amount at an internal project and eventually get it right. They have come a long way and I really like bing. Why not just spend the money and do within the company. Hire good people and do it yourself.
    brickengraver