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Microsoft May have to Write off Billions Because of Poor Sales

News by admin on Monday June 29, 2015.

microsoft news · windows phone news · industry news · admin

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The next year is hugely important for Microsoft. The company is launching Windows 10 Mobile later in the year, while new devices and flagships are certainly on the way alongside the fresh OS. However, Redmond may have to take a significant loss as it seems as though the company?s handsets are not selling as well as what was expected when Microsoft purchased Nokia's devices and services business.

Microsoft aimed to hold 15% of the smartphone market by 2018, the company hoped that Lumia smartphone sales would increase in the years leading to that date. The problem is, sales are not increasing at the levels Microsoft thought, and the brand revealed in a SEC filing that "In this highly competitive and volatile market, it is possible that we may not realize our forecast."

The danger is that if Lumia devices fail to gain the traction Microsoft wants that the company will have to write off all or at least some of the near $10 billion it paid for Nokia's hardware business. Of course, Microsoft is not new to huge write offs, Redmond wrote off $6.4 billion after the purchase of aQuantive three years ago, and also wrote off $1 billion worth of its own Surface tablets two years ago.

In the third quarter of fiscal year 2015, Phone Hardware did not meet its sales volume and revenue goals, and the mix of units sold had lower margins than planned... Given its recent performance, the Phone Hardware reporting unit is at an elevated risk of impairment. Declines in expected future cash flows, reduction in future unit volume growth rates, or an increase in the risk-adjusted discount rate used to estimate the fair value of the Phone Hardware reporting unit may result in a determination that an impairment adjustment is required, resulting in a potentially material charge to earnings."-Microsoft's 10-Q filing with the SEC

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