Microsoft loses money for every smartphone it sells

Microsoft has signaled that it may take a massive write-off of its Nokia acquisition, perhaps as early as July. In the 10-Q filed with the U.S. Securities and Exchange Commission (SEC) last week, Microsoft said that its Phone Hardware division, which is based largely on the Nokia assets acquired last year for approximately $7.9 billion, lost money in the March quarter. With revenue at $1.4 billion for the period, Microsoft said, cost of revenue exceeded sales by $4 million, meaning the company lost about 12 cents — even before marketing, R&D and other expenses were factored in — on each phone sold. More importantly, Microsoft also warned investors that it may need to write off some of the Nokia acquisition. “Given its recent performance, the Phone Hardware reporting unit is at an elevated risk of impairment,” Microsoft said, using a term to describe the situation when the market value of a business is less than what’s carried on the books. In such scenarios, corporations are required to balance accounts by taking a charge against earnings to the tune of the difference.