Microsoft announced that it will have a $6.2 billion write down in its fourth quarter, ending in June. This loss will mostly be related to the disappointing performance of an online advertising business it acquired five years ago.

Microsoft purchased Internet advertising firm aQuantive for $6.3 billion in August 2007. It ranks up there with Microsoft’s high-profile bid in 2008 for Yahoo Inc. (which fell through), and its May 2011 acquisition of Internet phone service Skype for $8.5 billion, its biggest purchase ever.

Microsoft acknowledges that the aQuantive assets it acquired are now worth less than what it paid for them. It underlines the general challenges companies have with trying to make money from online advertising.

“While the aQuantive acquisition continues to provide tools for Microsoft’s online advertising efforts, the acquisition did not accelerate growth to the degree anticipated, contributing to the write-down,” the company said.

Microsoft will take the non-cash charge in its Online Services Division, which includes search engine Bing, MSN and advertiser tools. The silver lining is that the company does not expect the write down to affect its ongoing business or financial performance.

“I don’t think it necessarily says that Microsoft’s online business, which is Bing, is unsuccessful, but I think it’s fair to say that aQuantive did not deliver, did not contribute to that business like they were hoping,” said James Ragan, an equity analyst at Crowell, Weedon & Co. “In the bigger picture, though, it’s a non-cash charge. It’s a hit to earnings, it’s a hit to capital, but it’s not a hit to cash. So the year will still be very profitable even after the write-down, and they’ll still have a very strong cash flow year.”

Microsoft said that although there was some good news in the Online Services Division (its Bing search share in the U.S. has been increasing, revenue per search has been growing and its partnership with Yahoo has continued to expand geographically) they noted, “the company’s expectations for future growth and profitability are lower than previous estimates.”

Source: L.A. Times