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Did MS just save 6.6 billion in taxes?

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  • User profile image
    androidi

    Very clever. Buy Nokia for only $1 bil, then do some accounting to say it was 6.6 billion loss (I mean, 1 bil was a low ball bargain, not what it was really worth obviously - but since the phones didn't do well, it really is now a 7.6 bil "loss") , and now they can bring back the tax haven money and deduct the repatriation tax using that "loss" without needing to wait for repatriation tax break.

    https://news.microsoft.com/2015/07/08/satya-nadella-email-to-employees-on-sharpening-business-focus/

    Or perhaps I just don't understand how accounting works?

  • User profile image
    jmar

    On a personal return wouldn't the capital loss require capital gains as offset ? Is a business tax return different ? In any case, wouldn't how much Microsoft benefits depend upon their tax rate which I assume is less than 100% ?

  • User profile image
    androidi

    Well I'm sure big four/goldman can arrange some sort of scheme for turning those haven moneys into capital gains, for % fee.

     

     

     

  • User profile image
    elmer

    , androidi wrote

    Very clever. Buy Nokia for only $1 bil

    $1B ?? - I thought they paid $7.2B

  • User profile image
    jmar

    7.2 billion is correct.
    Tue Sep 3, 2013 7:16pm EDT
    "Microsoft Corp will buy Nokia's phone business and license its patents for 5.44 billion euros ($7.2 billion) *** "
    http://www.reuters.com/article/2013/09/03/us-microsoft-nokia-idUSBRE98202V20130903

    I am curious whether Microsoft realizes a tax benefit from the write-off and what amount.

    **************************************************************************************************************

    The company is cutting up to 7,800 positions primarily in the phone business and will record an impairment charge of about $7.6 billion related to Nokia.

    Here we go again: The Microsoft layoffs (fiscal 2016 edition) are here, and they are significant. The company MSFT 0.20% plans to cut up to 7,800 positions primarily in its phone business and will record an impairment charge of about $7.6 billion related to acquisition of the Nokia devices and services business. That comes in addition to a restructuring charge of between $750 million and $850 million.

    Not so long ago, Microsoft CEO Satya Nadella warned of tough choices ahead. The fact that most of the cuts come from the company's phone business is not a surprise. In a recent reorganization, the company's phone business was merged into the overall Windows-and-devices group led by Terry Myerson. Phone chief Stephen Elop left the company.

    From the company statement:

    Based on the new plans, the future prospects for the Phone Hardware segment are below original expectations. Accordingly, the company concluded that an impairment adjustment of its Phone Hardware segment assets and goodwill of approximately $7.6 billion is required.

    The restructuring costs will cover the costs of layoffs; the impairment charge has to do with how the company accounts for the worth of Nokia from an accounting perspective and does not mean that Microsoft will lose $7.6 million from its balance sheet, a spokesman said. Basically, the future performance of Nokia is not what Microsoft anticipated, which in turn led restructuring and sales of some parts of that business. More details will be forthcoming in Microsoft's 10K filing on July 21.

     

    http://fortune.com/2015/07/08/microsoft-layoffs/

  • User profile image
    cheong

    Also, if the acquisition accompany with fixed assets that's bought less than 5 years, they can at their full right say they have that many loss as depreciation.

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    cheong

    Regarding the layoffs...

    HTC previously layoff-ed a bunch of "expensive" developers for their phone division, then last week (?) I heard they released an update that makes the phone to get fully charged by 13 hours... And then told affected customer to uninstall some Google Gallery Apps...

    Let's hope Microsoft have better idea on who can stay and they can layoff...

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  • User profile image
    jmar

    I still don't know what effect this will have on Microsoft's tax bill:

    "Nadella has just reversed one of his predecessors more significant acquisitions in a move that will cost Microsoft over $8 billion dollars when all is said and done."


    http://www.extremetech.com/computing/209470-microsoft-writes-off-7-6-billion-nokia-purchase-cuts-7800-jobs

  • User profile image
    kettch

    , jmar wrote

    I still don't know what effect this will have on Microsoft's tax bill:

    "Nadella has just reversed one of his predecessors more significant acquisitions in a move that will cost Microsoft over $8 billion dollars when all is said and done."


    http://www.extremetech.com/computing/209470-microsoft-writes-off-7-6-billion-nokia-purchase-cuts-7800-jobs

    This happens all the time in the corporate world. You buy another company, squeeze out the good parts, and toss the rest.

  • User profile image
    DeathBy​VisualStudio

    , kettch wrote

    *snip*

    This happens all the time in the corporate world. You buy another company, squeeze out the good parts, and toss the rest.

    Maybe you can explain what "good parts" Microsoft got out of all of this?

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  • User profile image
    kettch

    @DeathByVisualStudio: It's the same as usual. engineering expertise, IP, manufacturing capacity. Nokia had no real strategy aside from shotgunning out dozens of models in confusing patterns. This likely made for some organizational bloat, because Microsoft seems to be intent on still releasing 6 devices per year with 7,800 fewer people.

  • User profile image
    bondsbw

    From Mary Jo Foley's interview today with Satya Nadella:

    Last week's announcement was not about any change to our vision and strategy, but for sure it was a change to our operating approach. The way we're going to go about it. I'm not going to launch a phone a day. I'm going to focus on a few phones that actually grab share that, in fact, showcase our uniqueness.

    and another bit I found interesting:

    If anything, one big mistake we made in our past was to think of the PC as the hub for everything for all time to come. And today, of course, the high volume device is the six-inch phone. I acknowledge that. But to think that that's what the future is for all time to come would be to make the same mistake we made in the past without even having the share position of the past. So that would be madness.

    So when I think about our Windows Phone, I want it to stand for something like Continuum. When I say, wow, that's an interesting approach where you can have a phone and that same phone, because of our universal platform with Continuum, and can, in fact, be a desktop. That is not something any other phone operating system or device can do. And that's what I want our devices and device innovation to stand for.

  • User profile image
    kettch

    @bondsbw: It's not that much of a shift from the PC being the hub. They've just refocused on Windows being the hub, with devices such as PCs being just one piece of the picture.

    It's funny, Bill Gates was always talking about "the magic of software", but it was tied to specific hardware. With Windows now running on pretty much everything, they have a real opportunity to make some magic.

  • User profile image
    elmer

    , kettch wrote

    @DeathByVisualStudio: It's the same as usual. engineering expertise, IP, manufacturing capacity. Nokia had no real strategy aside from shotgunning out dozens of models in confusing patterns. This likely made for some organizational bloat, because Microsoft seems to be intent on still releasing 6 devices per year with 7,800 fewer people.

    MS bought themselves some degree of 'legitimacy' for Windows-Phone with Nokia and the Lumia brand. If they hadn't have done it, Nokia would have gone Android, and that opportunity would have been lost.

    However, having done that, there is no need for MS to stay in the business of actually making phones, just to maintain the Lumia product line - they can outsource that in the same way that they outsource the production of Surface, and rationalise the number of products they need, because they don't need to cover costs of mfg capacity that is greater than they require.

  • User profile image
    cbae

    , jmar wrote

    I still don't know what effect this will have on Microsoft's tax bill:

    "Nadella has just reversed one of his predecessors more significant acquisitions in a move that will cost Microsoft over $8 billion dollars when all is said and done."


    http://www.extremetech.com/computing/209470-microsoft-writes-off-7-6-billion-nokia-purchase-cuts-7800-jobs

    I don't know how a write-down "reverses" anything. Nokia still ended up with $7 billion in cash.

  • User profile image
    bondsbw

    @cbae:  That's because it really isn't a reversal, but more like what kettch said.  Some thought Microsoft was buying Nokia's phone division, so getting rid of it looks like it's a reversal.

    I don't think I've seen anyone ask, what if Nokia didn't want to sell just those areas (engineering, IP, patents, etc.)?  Maybe they told Microsoft they had to buy the phone division too, take all-or-none, so Microsoft did and pulled as much value out that division as it could before writing it down.

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