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01.07.09

Hard Week for Microsoft, Next Week Likely Harder

Posted in Finance, Microsoft, Rumour at 9:05 pm by Dr. Roy Schestowitz

Stock Dives

In what seems like a worthy punishment, Intel and Microsoft both suffered a major blow at the sight of stagnant sales.

Shares of Microsoft Corp., the world’s largest software maker, sank Wednesday after chip maker Intel Corp. said fourth-quarter sales missed already lowered expectations.

Even a music Web site has published an article about the effect of Microsoft’s sharp drop in value.

Rap veteran E-40 is reviewing his stock market options after losing money from shares in software giant Microsoft and his fast food chain Fatburger.

Had it not been for massive buybacks, Microsoft’s shares would be worth a lot less and so would the value of the company (as opposed to its cash reserves that rapidly run out [1, 2, 3, 4, 5]).

Cessation and Deflation

According to numerous reports, Microsoft has poured cold water on expansion plans.

Microsoft has put on hold any interest in further expanding its operations in Seattle because of the deteriorating economy, a spokesman said Tuesday.

Divisions Shutdown

According to this report, Microsoft will soon shut down some gaming divisions.

Reuters and other outlets have reported recently that both Microsoft and Sony will be closing some of their major gaming divisions in early 2009.

Microsoft has already shut down Ensemble Studios, as we mentioned in [1, 2, 3, 4, 5]. Since XBox360 makes a loss per sale, Microsoft is now willing to go as far as suing a bankrupt company.

Microsoft Takes Legal Action Against Woolworths In The UK

It could be called the end of an era, as Woolworths in the United Kingdom has closed it’s doors forever to the public. Amidst the announcement that Woolworths would be shutting down due to bankruptcy, there were the typical “everything must go” sales where the store was practically giving their goods away. Well everyone in the land of the Union Jack must not have got the memo, and Woolworths was left with a ton of overstock, and coincidentally some of that stock happened to be Xbox 360′s. Now Microsoft isn’t just trying to take legal action against Woolworths, or Deliotte who is the administrator of the now defunct retailer, just to crash their party.

This is also covered in:

How low have they sunk? [Clarification 08/01/09: this is in reference to Woolworths]

Layoffs

Some days ago we cited many reports of looming layoffs. There are some newer reports:

Regulation, Finally?

Another interesting report today comes from Satyam, which turns out to be a financial fraud.

Satyam Chief Quits, Admits Faking Financial Results

[...]

In a resignation letter submitted to Satyam’s board, B. Ramalinga Raju said the company’s balance sheet carries inflated bank and cash balances, non-existent accrued interest, understated liabilities, and overstated credit amounts owed to the company.

Satyam and Microsoft have a tight alliance.

It was almost 10 years ago that Bill Parish wrote: “Microsoft’s perspective is best reflected by Bob Herbold, Chief Operating Officer, to whom the CFO reports. Bob very sincerely replied, “Bill, everyone is doing it.” My response was that Microsoft is a leader and that others are now seeking to emulate these fraudulent practices they have legitimized. Naturally Bob was not pleased by this perspective and that was our final conversation.”

It was around the same time that someone from inside Microsoft had already blown the whistle to highlight financial fraud [1, 2].

Nervous lady

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46 Comments

  1. AlexH said,

    January 8, 2009 at 3:20 am

    Gravatar

    JFYI, suing a “bankrupt company” (actually, one that’s in administration – there’s a difference) is extremely common, for pretty obvious reasons.

  2. Roy Schestowitz said,

    January 8, 2009 at 3:42 am

    Gravatar

    Merciless nonetheless. There is a similar story about their bank.

  3. AlexH said,

    January 8, 2009 at 4:29 am

    Gravatar

    How on earth is it merciless? The business is being wound up!

  4. Roy Schestowitz said,

    January 8, 2009 at 4:42 am

    Gravatar

    And Microsoft behaves like a vulture, lurking for victims to peck at.

  5. AlexH said,

    January 8, 2009 at 4:46 am

    Gravatar

    Hang on. Microsoft are the ones owed millions, but EUK is the victim? How does that logic work?!

  6. Roy Schestowitz said,

    January 8, 2009 at 4:56 am

    Gravatar

    I doubt they can pay back. Should Red Hat also sue SCO for a frivolous lawsuit?

  7. AlexH said,

    January 8, 2009 at 5:04 am

    Gravatar

    Er, they’re not suing them for money, Roy.

  8. Roy Schestowitz said,

    January 8, 2009 at 5:17 am

    Gravatar

    Yes, of course.

  9. AlexH said,

    January 8, 2009 at 5:26 am

    Gravatar

    So what’s the actual problem?

  10. Roy Schestowitz said,

    January 8, 2009 at 5:30 am

    Gravatar

    It’s like this incident. It shows weakness.

  11. AlexH said,

    January 8, 2009 at 5:32 am

    Gravatar

    You think any other business which had millions of pounds of stock in someone else’s hands wouldn’t take legal action to get it back?

    I think you’re confusing weakness with basic business sense…

  12. Roy Schestowitz said,

    January 8, 2009 at 5:45 am

    Gravatar

    Although it’s a stretch, one could argue that Microsoft just wants lots of XBox360s out there, just as it wants lots of (counterfeited) Windows and Office out there. it’s production costs that make a difference though.

  13. AlexH said,

    January 8, 2009 at 5:52 am

    Gravatar

    Well, it obviously wants lots of Xbox360s out there – I’m not sure how that’s relevant though? The stock already exists, MS sent it to EUK and didn’t get paid for it. Now they want it back.

    Microsoft do tonnes of stuff worth criticising, but I just don’t see how this is anything different than normal business practice…

  14. Roy Schestowitz said,

    January 8, 2009 at 6:01 am

    Gravatar

    This was not the main criticism in this post, but you latched onto it. Reread the post to see things in context (it was about shutdown on XBox/gaming divisions)

  15. AlexH said,

    January 8, 2009 at 6:11 am

    Gravatar

    Well, most of the rest is just opinion/speculation.

    This is what I find difficult: sometimes, you justly criticise Microsoft for things they’ve done wrong. But othertimes, you criticise them when they’re doing things anyone else would do (this example, the CSS example, etc. etc.). Often, you criticise them for doing things that others are doing (e.g., the continual illogic about stock buy-backs).

    It makes it impossible to separate the valid criticism from the made-up “it’s bad because Microsoft are doing it”. We’re to believe that Microsoft have “sunk low” because they’re trying to recover debts? Give me a break.

  16. Roy Schestowitz said,

    January 8, 2009 at 6:29 am

    Gravatar

    That was Woolworths, not Microsoft.

  17. AlexH said,

    January 8, 2009 at 6:36 am

    Gravatar

    What was Woolworths?

  18. Roy Schestowitz said,

    January 8, 2009 at 6:43 am

    Gravatar

    Sinking.

  19. AlexH said,

    January 8, 2009 at 6:51 am

    Gravatar

    Perhaps you ought to correct the article then, because you’re talking about Microsoft and switch to Woolworths without noting it.

  20. Roy Schestowitz said,

    January 8, 2009 at 6:53 am

    Gravatar

    I’ve added the word “Woolworths”.

  21. AlexH said,

    January 8, 2009 at 6:55 am

    Gravatar

    Given you already called them “bankrupt” (which they’re not), why do we care how low Woolworths have sunk? Can you get any lower?

  22. Roy Schestowitz said,

    January 8, 2009 at 7:01 am

    Gravatar

    “Amidst the announcement that Woolworths would be shutting down due to bankruptcy,”

    http://www.talkxbox.com/article2981.html

    I cited it.

  23. AlexH said,

    January 8, 2009 at 7:03 am

    Gravatar

    “Bankrupt” is past tense. Woolworths are currently in adminstration.

    And anyway, it’s not Woolworths, it’s EUK, who are still trading and probably won’t go bankrupt (particularly since they’re part owned by the BBC).

  24. Roy Schestowitz said,

    January 8, 2009 at 7:06 am

    Gravatar

    Good for them.

  25. AlexH said,

    January 8, 2009 at 7:07 am

    Gravatar

    Bravo on rewriting it in ambiguous fashion again, anyway.

  26. Roy Schestowitz said,

    January 8, 2009 at 7:12 am

    Gravatar

    it wasn’t intended to be ambiguous.

  27. AlexH said,

    January 8, 2009 at 7:13 am

    Gravatar

    The simpler fix would be to cross out “they” and put “Woolworths”.

  28. Roy Schestowitz said,

    January 8, 2009 at 7:18 am

    Gravatar

    I didn’t want to use strikeout but rather just to clarify.

    Do you really have nothing better to comment on? I’ve posted some interesting things, but nitpicking appeals to you much more.

  29. AlexH said,

    January 8, 2009 at 7:28 am

    Gravatar

    No, it’s not the nitpicking, it’s watching the revisionism in action – how far you’ll bend to not admit a mistake.

  30. Roy Schestowitz said,

    January 8, 2009 at 7:34 am

    Gravatar

    If you are a perfectionist, use an encyclopedia or contribute to Wikipedia. If my source says that “…Amidst the announcement that Woolworths would be shutting down due to bankruptcy,” then I am allowed to innocently propagate an error every now and then.

    I write many posts here. Precision is hard when some of the articles from Google News are erroneous.

    If you have a nitpicking hobby, start a(nother) blog and express your point of view.

  31. AlexH said,

    January 8, 2009 at 7:35 am

    Gravatar

    You’re missing out the main point, which isn’t about your mistakes. It’s the made-up criticism that’s the big problem.

  32. Roy Schestowitz said,

    January 8, 2009 at 8:06 am

    Gravatar

    Of who? Woolworths? There is no criticism there; this part is pointing out that XBox360 is failing.

  33. AlexH said,

    January 8, 2009 at 8:16 am

    Gravatar

    The XBox360 isn’t failing in anyone’s eyes except yours, because you still repeat the “loss on every sale” meme, which as has been pointed out isn’t true any more.

    But I articulated my point many comments ago: you criticise Microsoft for many things. Some of them are entirely justifiable, and deserve wider notice. But then you pepper it with nonsense about CSS vendor extensions or (in this case) claiming back their own property, and start calling them names.

    By making bad points you drown out the good ones.

  34. Roy Schestowitz said,

    January 8, 2009 at 8:27 am

    Gravatar

    Ballmer himself calls XBox a “funny product” because they’ve lost billions on it. How do you define success? Number of adverts?

    The only winner is Nintendo, which Microsoft prefers to pretend does not exist.

  35. AlexH said,

    January 8, 2009 at 8:35 am

    Gravatar

    Not being #1 doesn’t make it unsuccessful. Having a huge installed base, a lot of subscribers, and a profitable business counts as “success” (and they are profitable now).

    You write Microsoft off at your peril. Seriously.

  36. Roy Schestowitz said,

    January 8, 2009 at 8:39 am

    Gravatar

    They are not profitable. They have lost about $7 billion. They are at the point now where they no longer lose even more money (that’s what they claim anyway), but it doesn’t make them “profitable”.

  37. AlexH said,

    January 8, 2009 at 8:50 am

    Gravatar

    Actually, it does. Profitability is over a financial period, not the entire lifetime of any given product. By your logic, Windows will be a profitable product basically forever.

  38. Roy Schestowitz said,

    January 8, 2009 at 8:54 am

    Gravatar

    You are attempting to spin this.

    Let me simplify this. Let us say that Microsoft’s balance-sheet for XBox looks like this:

    2000: -$1,000,000
    2001: -$1,500,000
    2002: -$1,400,000
    2003: -$2,000,000
    2004: -$2,000,000
    2005: -$2,500,000
    2006: -$4,000,000
    2007: -$7,500,000
    2008: -$7,200,000
    2009: ?? (2009 depression)

    Does that look like a successful and profitable business?

  39. AlexH said,

    January 8, 2009 at 8:56 am

    Gravatar

    As I just said, the concept of profitability is not a cumulative one for obvious reasons. No-one measures it like that.

    Call it spin if you like; it’s actually Finance 101. Go read how actual accountants do this, Roy.

  40. Roy Schestowitz said,

    January 8, 2009 at 9:07 am

    Gravatar

    ‘Pedancy’ with literal meanings does not change the fact it is a piker from a financial perspective,

  41. AlexH said,

    January 8, 2009 at 9:15 am

    Gravatar

    It’s not pedancy, Roy. You can’t redefine “profitability” to your own term just because it suits your argument.

    This is a classic example of what I’m saying. Microsoft (and, to a lesser extent, Sony) have massively subsidized their entry into this market. That’s fair enough criticism.

    But then you over-egg the pudding by basically padding it with fabrication. You repeat old memes which are no longer true, and meddle around with words.

  42. Roy Schestowitz said,

    January 8, 2009 at 9:17 am

    Gravatar

    Which memes? Be specific, please. Subsidy of entry does not mean that a product will not generate a loss throughout its lifetime.

  43. Dan O'Brian said,

    January 8, 2009 at 9:32 am

    Gravatar

    Roy: go out and get some real-world experience, please, before you further humiliate yourself.

    Actually, on second thought, it’s more funny if you don’t.

  44. Roy Schestowitz said,

    January 8, 2009 at 9:34 am

    Gravatar

    Dan,

    Your message lacks content.

  45. AlexH said,

    January 8, 2009 at 9:43 am

    Gravatar

    I’m sure he can make something up if you give him a few minutes.

  46. Dan O'Brian said,

    January 8, 2009 at 10:19 am

    Gravatar

    His faulty intepretation of the “Linux Heat Map” is a great example. His lack of understanding in this article is yet another.

    The list is endless.

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