EditorsAbout the SiteComes vs. MicrosoftUsing This Web SiteSite ArchivesCredibility IndexOOXMLOpenDocumentPatentsNovellNews DigestSite NewsRSS

02.27.08

When Microsoft Corporation Met Debt

Posted in Deception, Finance, Fraud, Microsoft at 1:49 am by Dr. Roy Schestowitz

Microsoft’s IBM-isation is closer than you might realise

For a fact, Microsoft might soon enter debt and we have been studying for quite some time the true story behind Microsoft’s PR and accounting walls. Not so long ago we returned our attention to the issue of misconduct, including systematic kickbacks. There is more to bribery then just kickbacks, which themselves as a subtle form of bribery more severe than lobbying, which is legalised to a greater or lesser degree.

Reuters has just published an article about the government’s new and more aggressive effort to curb briberies. Here is the opening portion of an article you might find surprising (witness the true scale of corruption):

Companies under investigation for violations of U.S. bribery laws will likely face heightened scrutiny from law enforcement officials all over the world as probes widen and spill across borders, a study found.

Yesterday, having taken a look at Microsoft’s SEC filing, Groklaw brought attention to the following article titled “Debt in Disguise” and we shall return to this in a moment.

The purpose of securitization is to make the credit rating of the company practically irrelevant in a financing, so that even in a bankruptcy the receivables cash flow will be protected….

The rating agencies also rely greatly on legal constructs that say the payment stream to investors will not be hindered. For instance, the transfer of receivables to the SPE must be a “true sale.” That is, the seller must not retain too much of the reward or the risk coming from the asset, says Robert Hahn, a partner with Hunton & Williams LLP. In addition, the SPE has to be “nonrecourse” — in other words, the company’s creditors must not have claim to the assets of the SPE if the originating company goes bankrupt.

“Securitization divorces the creditworthiness of the [company] from the credit of the pool,” says Mark Spradling, a partner with Vinson & Elkings LLP. “True sale and nonconsolidation are part of that separation.”

But the opinion that legal control of receivables has passed to a third party has not been litigated in the bankruptcy courts….

Tapping the capital markets without a lending bank in between means that even non-investment-grade companies can finance at near what triple-A companies pay.

From the latest SEC filing, the portion of interest was this. Read it very carefully.

Antitrust, unfair competition, and overcharge class actions. A large number of antitrust and unfair competition class action lawsuits have been filed against us in various state, federal, and Canadian courts on behalf of various classes of direct and indirect purchasers of our PC operating system and certain other software products. We obtained dismissals of damages claims of indirect purchasers under federal law and in 15 states. Courts refused to certify classes in two additional states. We have reached agreements to settle all claims that have been made to date in 19 states….

Other antitrust litigation and claims. In November 2004, Novell, Inc. filed a complaint in U.S. District Court in Utah, now consolidated with other cases in Maryland, asserting antitrust and unfair competition claims against us related to Novell’s ownership of WordPerfect and other productivity applications during the period between June 1994 and March 1996. …

Patent and intellectual property claims. We are vigorously defending more than 45 patent infringement cases. …

Adverse outcomes in some or all of the matters described in this section may result in significant monetary damages or injunctive relief against us that would adversely affect distribution of our operating system or application products. We may enter into material settlements because of these risks. …

As of December 31, 2007, we had accrued aggregate liabilities of approximately $840 million in other current liabilities and approximately $660 million in other long-term liabilities for all of the contingent matters described in this note. While we intend to vigorously defend these matters, there exists the possibility of adverse outcomes that we estimate could be up to $4.1 billion in aggregate beyond recorded amounts. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact on our financial position and on the results of operations for the period in which the effects become reasonably estimable.

Bear in mind that later today Microsoft is likely to be slapped by a very considerable fine for its market abuses. This is important. Consider this in light of Microsoft approaching debt (unless it’s already in concealed debt) and look back at the article “Debt in Disguise”. According to Steve Lake’s latest analysis, none of this is so far fetched.

If you don’t believe me, take a look at what’s happening out there. Linux is cutting into Microsoft’s desktop dominance. It’s also wiping away any hope of it gaining server dominance. Firefox is quickly replacing its browser as the preferred method for surfing the internet. Outlook is being slowly knocked off its pedestal by open source alternatives, and other competitors are attacking them from all sides in their other fields as well. Open Source is on a roll and Microsoft is getting run over on all sides, and while it may not seem like they’re loosing the war, they are. Just because Open Source isn’t in the mainstream news doesn’t mean it’s not winning. And if this isn’t causing Microsoft and Steve Balmer to reach the point of being nearly panic stricken, then I’m a monkey’s uncle. I honestly believe right now that they’re terrified. Hence the battle for Yahoo is a battle for their very existence.

The word “terrified” is the same one that we used a week ago. The taxoperability program was a desperate attempt to escape the Big Fine which is yet to be announced (c/f aforementioned hyperlink). It was an attempt to please the EU while securing some revenue (‘software patent tax’). Without the EU’s nod of approval, will Microsoft gradually go into debt? How does Yahoo fit into this and are OOXML, Silverlight and other anti-LAMP/standards technologies merely a desperate late attempt?

“Why else would many of Microsoft's top executives be dropping like flies and escape the company?”Do bear in mind that, as Glyn Moody puts it, Microsoft’s dumping of Silverlight for youngsters was truly a giveaway (a word that we used only two days beforehand. It gave away Microsoft’s fear.

If you think all of this is crazy nonesense, be aware that we were cited in Linux Journal, among other publications that start to recognise Microsoft’s financial weakness, which the company has effectively been hiding for quite some time. Why else would many of Microsoft's top executives be dropping like flies and escape the company? Again, it’s quite a giveaway. Microsoft was caught with its pants down when trying to spin this. Do not be hypnotised.

Further reading:

“But the $29 billion on hand at last count was less than half the cash and short-term investments held by Microsoft about two years ago.”

Todd Bishop, Microsoft Watcher, Seattle P-I

Share this post: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • co.mments
  • DZone
  • email
  • Google Bookmarks
  • LinkedIn
  • NewsVine
  • Print
  • Technorati
  • TwitThis
  • Facebook

If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

Pages that cross-reference this one

5 Comments

  1. Billy said,

    February 27, 2008 at 4:25 pm

    Gravatar

    Matching Cliches

    The bigger they are, the harder they fall!

    Oh, how the mighty have fallen?

  2. DOUGman said,

    February 27, 2008 at 7:38 pm

    Gravatar

    After reading all the stories here, maybe I was being too generous when I mentioned the 2018 figure earlier, perhaps it’s more like 2010-2012??

    D.

  3. Quantum Flux said,

    March 1, 2008 at 10:04 am

    Gravatar

    Ah the rantings of the ignorant, paranoid, delusionals.

    You guys keep praying and hoping that MSFT is “going out of business”. I guess it makes your apparently really sad and empty lives complete. I’m sure you have no opinions on real world problems, but it’s somehow important to you that, while you can own a Mac or run Linux and use DivX and Firefox, most people run Windows. That you folks see this as the greatest sin in human history and therefore obsess over attempting to spin anything into bad news for MSFT belies your insanity.

    DOUGman… Keep dreaming that MSFT is on its way out of business. Shout it from the roof tops actually. If you shout it long and loud enough, people will realize the depth of your condition.

    A company with $29B being spun as “nearly bankrupt and out of business” and yet still so dangerous, apparently, that govts need to fine it billions a year? Which is it deranged dreamers? Unstoppable juggernaut which must be brought to task, or beaten and broken down charlatan that is almost out?

    I have to say that from a philisophical standpoint, I’m growing to despise the OSS movement. Like all other supposed “free thinker” movements designed to “save us”, it is more and more looking like a fascist wave of extremism that is designed to give you want THEY want like it or not. When was the vote on proprietary software having value and developer time being worth something? Oh thats right. You terrorists (following Stallman) simply decided that the rest of us were “idiots” and your way was THE way forward come hell or high water. Yep. That sounds like JUST the kind of “openness” I’m hoping for. And Im sure those of us in the enterprise space CONSUMING software will feel like we have won SUCH a victory when we are paying massive support costs to IBM, Sun, or some other OSS support titan. Because that will make SUCH a big difference in the day to day and lead to SO much more cost efficiency in our operation.

    Anyone on the practical usage side of this argument sees it for the BS it is. And IF that sea change were to come, what will be the NEXT battle for you frothing maniacs? Because I suspect you wont then start devoting your basement dwelling time to cranking out code for “the good of mankind”… You’ll be on to your next effort in social engineering.

  4. Roy Schestowitz said,

    March 1, 2008 at 10:17 am

    Gravatar

    Your rants and insults aside, I’ll address your point about Microsoft’s finances.

    It appears as though the reality is more complicated than you wish to know. A company is able to move money between buckets and even borrow money from investors, pull money from its savings and shuffle wealth in a variety of ways in order to disguise losses. We have some evidence of this (articles from the mainstream press) and we write a lot about this in this site also, but you are certainly not interested. You have already made up your mind.

  5. CoolGuy said,

    March 1, 2008 at 10:39 am

    Gravatar

    @Quantum Flux

    So u feel threatened by FOSS. hum…

    what kind of proprietor software do u work on that the FOSS is going to replace very soon…i guess u need to hate those FOSS developer…hum…very strange.

    you kind of remind me of that bald guy in Matrix, who wanted to go back to the matrix and enjoy his fake life.

What Else is New


  1. Patent Maximalists Refuse to Accept That Their War on Patent Quality Also Dooms a Pan-European Patent Court System

    The EPO‘s embrace of patent maximalists’ agenda, which necessarily means significant decreases in patent quality (and deviation/departure from the EPC), dooms patent certainty; it also, however, dooms the Unitary Patent (UPC) because an extension of this rogue regime to the court system won’t be tolerated



  2. Links 24/8/2019: Wayland’s Weston 7.0 and More

    Links for the day



  3. Outsourcing to Microsoft and Openwashing as a Service (OaaS): This is the Linux Foundation in 2019

    The concept of "Open" at the Linux Foundation gives room for thought; are things really being opened or mostly marketed as "Open" and, if so, is the Foundation more like a marketing agency?



  4. Links 23/8/2019: Wine 4.0.2 Released, Removing Qt 4 From Ubuntu

    Links for the day



  5. Links 22/8/2019: KDE ISO Image Writer, GNU Parallel ‘Jesper Svarre’

    Links for the day



  6. Guarding and Rescuing the FSF Titanic: A Free (as in Freedom) Library, and Federation of Advocates

    "This library is not just for cultural works, but also for software."



  7. Linux Foundation's Linux.com in 2019: Zero Articles (Nothing Original) and a Terrible, Rookie New Design

    Linux.com has become a curated syndicator of news (edited by one single Microsoft proponent); the site has also eliminated its traditional design in favour of something only 'hipsters' can appreciate



  8. Managing IP as Team UPC's Megaphone and Lobbying Front

    Managing IP is lying on behalf of Team UPC yet again; the site's long history promoting the UPC hasn't ended even when prospects of the UPC are slim to none



  9. No More Rights for EPO Staff?

    The oppression and the crackdown on labour rights in Europe's second-largest institution has deepened to the point where staff is paid as little as is legally possible



  10. Links 22/8/2019: GNOME 3.33.91, Systemd 243 RC2, Cockpit 201, Ubuntu Touch OTA-10, FreeIPMI 1.6.4

    Links for the day



  11. Some Patent Attorneys Dislike Techrights Not Because It's Wrong But Because Software Patents Are Wrong (and Sometimes Illegal)

    Odd rants which misuse common law and ignore alleged Fair Use (and misinterpretation of copyright law, for censorship purposes) would have people believe that we're wrong; but it's more likely that the person in question is jealous, insecure, or offended by our stance on patent scope, which is very much rooted in the law itself (and the views widely held by software developers globally)



  12. Guarding and Rescuing the FSF Titanic: Distro-libre and feature-schema

    "Every time a distro does not suit a user's purposes, and it is less work to adapt the distro on one's own than to affect the distro in any other way, a distro is born."



  13. Links 21/8/2019: Dell's XPS 13, Mesa 19.2 RC1, Librem Update

    Links for the day



  14. Links 21/8/2019: Open Source POWER, Alpine 3.10.2, Netrunner 19.08

    Links for the day



  15. Edward as a Nodder to Team UPC Kool-Aid

    Bristows LLP is at it again and it's getting pathetic, not just dishonest as usual



  16. Guest Post: António Campinos' European Patent Office Redefines Modern Slavery in the Heart of Europe in 2019

    The European Patent Office’s (EPO) President António Campinos — like his predecessor Battistelli — emulates Chinese labour practices



  17. Guarding and Rescuing the FSF Titanic: There is More Than One Iceberg Ahead

    "This strategy is not far from when Microsoft talked about "de-commoditizing protocols" in the late 90s, as part of their plans to control, dominate, and end Open Source and Free software."



  18. EPO Cannot Handle Patent Justice With a Backlog of About 10,000 Cases at the Boards of Appeal

    The EPO's long war on judges and on the law has proven to be costly; it's difficult to pretend that the EPO functions like a first-world legal framework



  19. The European Patent Office Increases Surveillance: Can't Get Food Without Being Spied on

    The infamous "War on Cash" has been 'won' at Europe's second-largest institution, where people's diet can now be monitored and indefinitely retained on the system



  20. To GNU/Linux, the Operating System, GAFAM (Google, Apple, Facebook, Amazon, Microsoft) is Not the Threat. Microsoft is.

    Don't let Microsoft get away with its bogus narration; GNU/Linux is primarily under attack from Microsoft, whereas Software Freedom in general is under attack from many directions



  21. The Free Software Foundation (FSF) Has the Full Support of Techrights

    Our support for the FSF is strong enough that we want to occasionally suggest improvements; there are growing frictions designed to isolate the FSF and cause self-restraint/censorship



  22. Why We Support Phoronix (Whereas Some Others Do Not)

    Some people try to characterise Michael Larabel as the 'bad boy' of Linux even though Michael is probably the hardest working Linux journalist out there



  23. Guarding and Rescuing the FSF Titanic: The Simplest Ways that AI will Change Computing

    "AI is already used to help kill people. We should be cautious, and know that the best rules we come up with (like no doing magic outside the school grounds) won't be followed all the time."



  24. Links 20/8/2019: DragonFlyBSD Developing DSynth

    Links for the day



  25. Guarding and Rescuing the FSF Titanic: Narcissism in The Community

    "Narcissists are drawn to intelligent people. They take great pleasure in attacking, controlling and defeating intelligent people because it makes them feel smarter and more important."



  26. Breaking the Law Has Become the Norm at the European Patent Office

    The European Patent Office’s ongoing practice of destroying critics/whistleblowers and crushing unions, judges, examiners etc. — as well as threats and bribery of the media — ultimately mean a perpetual state of lawlessness that, if it prevails, will let patent trolls raid the European economy and stall innovation



  27. Links 20/8/2019: KMyMoney 5.0.6, Kdenlive 19.08

    Links for the day



  28. Guarding and Rescuing the FSF Titanic: Free Software in Education

    "If everyone learns to code, then everyone gains some understanding of how to code in other languages."



  29. Links 19/8/2019: Another Linux 5.3 RC, OpenSUSE's Richard Brown Steps Down, Slackware Creates Patreon Page, Qt 6 Initiated

    Links for the day



  30. Speaking Truth to Monopolies (or How to Write Guest Posts in Techrights)

    We need to have more articles tackling the passage of all power — especially when it comes to software — to few large monopolies that disregard human rights or actively participate in their abolishment in the digital realm


RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

Recent Posts