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Microsoft to take charge
September 27, 2000: 6:23 p.m. ET

Software giant to take $350 million charge, shift how reports its revenue
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NEW YORK (CNNfn) - Microsoft Corp. said Wednesday that it would take a one-time charge against earnings of $350 million in its fiscal first quarter to comply with a new accounting rule on derivatives losses.

In addition, the software giant said it will soon give investors a more detailed breakdown of revenue from its various product lines. The revenue reporting change will shift the company's slow growing Windows operating system and Office products into their own category, while leaving total revenue unchanged.

Microsoft will take the $350 million charge to comply with a Financial Accounting Standards Board rule that requires quarterly reporting of changes in the value of derivatives, except for derivatives transactions that are part of "qualified hedges."

The $350 million figure includes the software giant's cumulative historic loss from investments in derivatives, which are contracts whose value is tied to an underlying asset. Examples include futures, forwards, options, and swaps.

graphicThe Redmond, Wash.-based company's priorities are shifting toward its recently introduced its Microsoft.NET platform for Internet-based products and services. The new method of reporting revenue reflects that shift, said John Connors, the company's chief financial officer.

"The new segments reflect the company's recent re-organization around these priorities and will help investors evaluate our progress in these areas," Connors said in a statement.

Microsoft (MSFT: Research, Estimates) will use these new revenue segments when it reports first quarter results on Oct. 18. The company also released two years of historical financial results using the new revenue segment format. The new format affects only the way in which Microsoft's revenue segments are reported, not total revenue.

Starting with the first quarter earnings report, the new segments will be:

Desktop Software: the Windows operating system and Microsoft Office

Enterprise Software and Services: Windows 2000 Server, SQL Server, Exchange Server, and Developer Tools, Consulting Services, and Product Support Services

Consumer Software, Services, and Devices: MSN, WebTV, Learning and Productivity Software, Embedded Software, Mobile and Wireless, and Games

Consumer Commerce Investments: Expedia Inc., the HomeAdvisor, online real estate service, and the CarPoint online automotive service

Other: Microsoft Press, keyboards, and mouse products

Microsoft formerly divided its business into three major segments: Productivity Applications and Developer; Windows Platforms; and Consumer and Other. The Productivity Applications division contained its Office suite of applications, as well as SQL Server and Exchange Server. The Windows Platforms division contained the company's Windows operating systems.   Back to top

-- Reuters contributed to this story