In an April filing with the SEC, Microsoft signaled that it may take a massive write-off of the Nokia deal.
"Given its recent performance, the Phone Hardware reporting unit is at an elevated risk of impairment," Microsoft said in the filing, 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.
Microsoft currently carries $5.46 billion in "goodwill" from the Nokia acquisition on its books, as well as another $4.51 billion in intangible assets. The Redmond, Wash. company had attributed the Nokia goodwill to "increased synergies that are expected to be achieved from the integration of NDS [Nokia Corp.'s Devices and Services business]."
That value may now be greatly overstated, Microsoft acknowledged.
Microsoft does its impairment calculations annually at the beginning of May. If it wrote down part or all of the $5.46 billion in goodwill related to the Nokia acquisition, it would do so in the current quarter, which ends June 30, and probably announce it in July, either at or before its next scheduled earnings call with Wall Street.
Sign up for CIO Asia eNewsletters.