Microsoft would write down 5,000 million dollars in losses due to its division of telephones

Although the numbers for Lumia equipment sales don't look so bad (unit sales increased by 18% compared to the last year), Microsoft seems not to be so optimistic regarding the financial benefits that the telephone division can generate for them in the future.

This is partly because Redmond is currently losing money on every Windows Phone device it sells on the market (45 cents dollar for each Lumia sold, excluding marketing, research and development, and other expenses).The consequence of this is that the company would plan to write off a significant portion of the $7.9 billion it paid for Nokia's handset division.

Redmond would be assuming a loss of 5,000 million dollars by reducing the value of its telephone division "

This means that Microsoft would be admitting that profit forecasts for the phone division in the coming years would not be fulfilled, and that therefore said division is worth less than what currently appears in its accounting books. How much less? It is speculated that the loss could be some $5 billion, most of it coming from discounting the supposed synergy value that had been attributed to the devices once inside Microsoft."

This is a gigantic number, even on the scale of a company as large as Microsoft.To put it in perspective, that's more than 7 times all revenue generated by Surface in the past quarter, and even more than all profits made by the company as a whole in said period.

In 2012, an even higher figure was written off: 6.3 billion dollars, after the purchase of aQuantive

Even so, it's not the largest such loss Redmond has faced in its history, as in 2012 it wrote off nearly all of the value it paid by aQuantive ($6.3 billion), a company acquired to take on Google after the latter acquired DoubleClick.

What does this mean for users?

This whole situation does not imply that Microsoft is going to give up on Windows Phone, or anything like that. However, it does put pressure on the company to further reduce its manufacturing costs Lumia equipment.In the words of Satya Nadella himself:

Another consequence is that the company will have even fewer economic incentives to pay attention to the high segment of the market, which we already know is not gave him too many returns.

On the other hand, and in a somewhat more optimistic interpretation, it should be taken into account that the losses faced by Nokia before the purchase of Microsoft were much larger than those seen today (in the order of 1 billion dollars a quarter, versus only 4 million in the last period ).

Looked at from that perspective, Microsoft Mobile's situation isn't so bad, and the move to take Nokia's purchase at a loss could well correspond to a move by Satya Nadella to improve various financial metrics in future quarters, which could work, as long as the market doesn't over-penalize this measure.

Via | Paul Thurrott