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05.12.09

Microsoft Debt and Tax Evasion

Posted in Finance, Microsoft at 8:06 am by Dr. Roy Schestowitz

“There is such an overvaluation of technology stocks that it is absurd. I would include our stock in that category. It is bad for the long-term worth of the economy.”

Steve Ballmer

Summary: Microsoft reenters “Reality Mode” as financial issues inevitably surface

IT WOULD only be reasonable to say that following Microsoft's abysmal results (earnings are down 32%) and additional layoffs, Microsoft struggles to hide its problems. We’ve already remarked on Microsoft’s massive tax evasion [1, 2] (billions of dollars per year) and even the Seattle press cannot turn a blind eye to it, despite the harm this may cause to their beloved Microsoft. That’s billions of dollars that Microsoft virtually took from taxpayers’ pockets (the hidden “Microsoft tax”).

How Obama’s tax reforms could impact Microsoft’s bottom line

[...]

The debate hinges on policies that let companies with international operations avoid higher U.S. tax rates by reinvesting their foreign earnings overseas. The Obama administration last Monday detailed its plan to put a damper on that practice.

“Currently, businesses that invest overseas can take immediate deductions on their U.S. tax returns for expenses supporting their overseas investments but nevertheless ‘defer’ paying U.S. taxes on the profits they make from those investments,” the White House said in a May 4 briefing document. “As a result, U.S. taxpayer dollars are used to provide a significant tax advantage to companies who invest overseas relative to those who invest and create jobs at home.”

From the same publication comes this report about Microsoft debt.

Microsoft, which has historically avoided borrowing money, this morning took the next step in its previously announced plan to raise funds through a public debt offering. The company made the move in a preliminary prospectus filed with the Securities and Exchange Commission.

It underplays the severity of the matter. This Microsoft-sympathetic reporter cites a Bloomberg article from another reporter who is close to Microsoft (Dina Bass). This leads to the funny feeling and suspicion that Microsoft is spinning this discomforting (probably obligatory) disclosure using all of its friends in the press. It’s a familiar strategy when attacking competition (seed, the reference and repeat). Microsoft debt would not surprise us though. See for example what we wrote in:

A Microsoft shareholder already likens Steve Ballmer and Bill Gates to Bernard Madoff and other shareholders are equally resentful and want Steve Ballmer out.

When it comes to Microsoft’s news about debt, we have already alluded to it yesterday. Also yesterday in the very same post we showed that Microsoft is attacking Google using regulators. It’s worth keeping an eye on Christine Varney because TechCrunch suggests she may try to deflect antitrust pressure from Microsoft onto Google.

Watch Out Google, Obama’s Antitrust Chief Is Looking To Make An Example Out Of You

The Obama Administration’s new chief antitrust enforcer at the Department of Justice, Christine Varney, is making it very clear that she is going to be much more aggressive in bringing antitrust actions against large, American corporations.

Microsoft has its share of government insiders [1, 2, 3, 4, 5, 6, 7, 8] with whom it can attack Google via the authorities. There is precedence here, so it’s just not a theory; it’s predicated upon Microsoft’s consistent behaviour and Microsoft is at great risk right now, so it’s merciless.

Debt and demand

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