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03.03.08

References Roundup: Microsoft’s Financial Situation

Posted in Finance, Microsoft at 5:05 am by Dr. Roy Schestowitz

Behind a wonderful game of embellishment

Over the many years, Microsoft has successfully created and secured a self-glorifying image [1, 2] which is hard to break. It is a PR exercise. Those who dare to try and break it will be maliciously abused, have their name smeared (cue Bill Parish), pressured to change their minds, or pressured out of their job.

Domination in one area of computing, namely desktop computers, was somehow seen as a route to infinite wealth. Never mind services, servers, hardware sales and so forth. For that there are collusions and kickbacks, but these stories are separate and they won’t be discussed further because scope here is limited.

“Large companies can find themselves paralyzed and difficult to manage, so it’s not just a question of complacency.”One must remember that market presence in a particular area does not warrant profit. It is only success in that area which brings good RoI. Large companies can find themselves paralyzed and difficult to manage, so it’s not just a question of complacency. Just ask Niall Keneddy, who left the company (Microsoft) shortly after joining because he had found a paralyzed giant where he simply could not work effectively. He occupied an area where Microsoft continues to lose vast amounts of money. It’s tomorrow’s main area which requires the company to evolve urgently (e.g. with Yahoo).

There appears to be a bit of an illusion which was propagated from one biased or misinformed analyst onto the other (the “Big Lie” or the “Big Secret”). After the departure of the previous CFO of Microsoft, we decided we ought to explore (hopefully expose) what they try to hide using the assistance of the new CFO, whose claimed figures are too good to be true (on the whole).

As Free software gained traction and provided an immortal alternatives to markets worldwide, rarely could Microsoft afford to crack down on copyright infringement. Even the monopoly still found that it had an amorphous competition, so it had no total control over price. In fact, Gates openly said that it’s easier to compete against Linux when Windows costs $0 in a nation like China. So, with many nations using Microsoft software for ‘free’ (gratis, unlicensed software), how could Microsoft keep up? Has it really been keeping up?

Let us look more closely at our past writings.

A reader has made suggestion as to how we might get even more impact from material that we have accumulated: “You’ve got great things there, but there tend to whizz off in hyperlinks to previous articles, leading to multiple
webs (sic) of information that are very hard to follow.”

“It would be great if you could write a kind of round-up article every so often, summarising all the main developments that have happened in this area,” he added. “Such articles would be much easier to digest, and have far more impact.”

Here is a summary of about half of our posts which cover this area. To make them digestible (readable without having to follow the link), a summary of references (external) and key points are provided for each.

Takeaways: Tax evasion and misconduct.

References: MSFT dividend statement/declaration, Wisconsin cracks down on tax loopholes, Gates Foundation as tax evasion tool, closure of Microsoft branches in Hungary and Ecuador for alleged misconduct, stock options practices pose questions, merger of losing units to hide losses, evidence of massive losses, Microsoft starts massive stock buybacks, company’s savings halved, vice president caught inside-trading.

Takeaways: Microsoft does not tell the truth.

References: Articles on massive Microsoft losses seemingly vanish, problems for embedded Windows, executive exodus seen, only two division are responsible for nearly all Microsoft’s profits, Jim Allchin expresses fears before abrupt departure, Soros predicts problems for the economy.

Takeaways: Figure ‘massaging’ and questions about CFO.

References: Microsoft reaches out for a loan, background about CFO.

Takeaways: Buybacks analysis of IBM (previous-generation ‘dinosaur’) and Microsoft

References: Both companies have shared the very same problem, which they can successful conceal using savings

Takeaways: Failure to evolve.

References: Microsoft clings on to dying cash cows, Yahoo as a matter of Microsoft’s long-term survival.

Takeaways: The Gates Foundation’s role as a strategic financier.

References: World banker takes over the Foundation, a look back at charity payments amid antitrust investigations, Microsoft loses $40 billion in value within days.

Takeaways: Lesser-known divisions cost Microsoft billions of dollars.

References: Many simultaneous blows and pains brought together in a parallel (yet truly independent) analysis. This includes HD DVD, Zune, XBox 360, the Web division and far beyond.

Takeaways: SEC filing for MSFT reveals fear of antitrust and legal action.

References: The US exposes high level of corruption, debt in disguise possibilities raised, a look at Microsoft SEC filings from December, Yahoo and debt, fear of Linux.

Takeaways: Microsoft’s core team decided to leave.

References: Heaps of references to Microsoft’s recent departures, mostly at the highest of levels.

There are many other isolated references that come to mind, including some recent ones which show cases of tax evasion, a highly significant drop in Microsoft’s position as a lucrative place to work in (annually updated ladder of ranks) and writings about hiring standards in the company declining (courtesy of Joel Spolsky, former Excel manager at Microsoft).

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