Microsoft: loss shows disruptive power of the web
When Microsoft paid $6.3billion for aQuantive in 2007, it was a clear response to Google’s increasingly dominant position in web advertising. The plan was to separate online advertising from internet search – a challenge to Google’s whole business model – but as we see from today’s increased revenues at Google, that didn’t work. It’s led to Microsoft’s $6.2 billion write-down that pushed them into the red for the first time.
The aQuantive fiasco would never have happened had Microsoft previously been more sure-footed in handling the web – but this was the era when the company was still defending Windows Mobile, and was telling the world that Windows Vista was worth spending money on. Those days are long gone.
Since then, however, it’s the rest of Microsoft’s business that has been challenged by the growing dominance of the internet, too – tablet computers led by the iPad rely for much of their success on the web, and so do the dominant Android and Apple mobile phones.
But while Microsoft has been slow to sort out its strategy, earnings and profits have held up well and the plans for Windows 8, Microsoft Office and other vital products such as SharePoint look remarkably strong. Where there ought to be a dip immediately before such major launches, in fact existing products are continuing to perform very well.
Microsoft still grew its revenue by 4 per cent year-on-year for the Q4, and that’s 7 per cent after adjustments. Profits in the Office division rose to $4.1billion from $3.8billion.
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