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04.25.10

Microsoft Cumulative Debt Almost Doubles to About $80 Billion in Just a Few Years (Updated)

Posted in Finance, Microsoft, Novell at 7:15 am by Dr. Roy Schestowitz

[Update: A reader points out that “the graph is of cumulative debt. Which equates with MSFT having around $6Bn debt from being debt free in Q2 2008.”]

Bernard Madoff
Microsoft’s debt exceeds even Madoff’s

Summary: Microsoft’s debt — like Novell’s debt — is a scarcely-explored subject in the media, but we’ve finally found the latest figures

OUR WIKI now contains this page about Microsoft’s financial situation. It is not what many people imagine it to be and last year we pointed out that Microsoft has debt. Yes, it’s true. We just couldn’t quite tell at the time how big the debt was, but now we have a clue. Here is some background reading:

Business Insider shows data from a reliable source, indicating that Microsoft’s debt is going through the roof (increasing faster than Microsoft can keep up with). Read the numbers. While Google and Apple have no debt, Microsoft has a huge debt approaching a tenth of a trillion dollars. Microsoft relies on shareholders to put their money in this pit.

Tech companies, which generally throw off tons of cash, added a healthy sum of debt to their balance sheets last year, the Wall Street Journal notes.

We are increasingly welcoming a world where companies with a sort of overdraft claim to be “cash rich”. It’s the same world where a country with 14+ trillion dollars in debt pretends the problem will just go away and asks Microsoft to create computer games to mitigate perception issues [1, 2].

“While Google and Apple have no debt, Microsoft has a huge debt approaching a tenth of a trillion dollars.”Microsoft’s debt is not so unusual, but it is far greater than the rest. Novell’s own debt is an issue we explored last year.

Many of Microsoft’s business units make no money. They just lose a lot of money, but people continue to think about Windows and Office, which are the exception, not the norm. These are cash cows whose revenue is actually declining (Office revenue is still going down). We mentioned this some days ago when we cited Joseph Tartakoff, but as Tartakoff later points out (regarding the same article of his that he tweeted about 4 times): “Microsoft’s online losses up to a staggering $713 million, from $411 million a year ago” (this is not surprising at all).

That’s the loss in just one quarter and one business unit! It used to be over $2 billion in losses per year, now it’s around $3 billion in losses per year, assuming this new pace of losses carries on.

More information about Microsoft’s real financial performance is coming soon. We are going through reports and interpreting them. It doesn’t look too good.

Microsoft keeps taking on debt, whereas some of its biggest competitors remain debt free. Terry Porter writes: “It’s interesting that Google and Apple both deploy Unix and are debt free, so perhaps using Unix must be good for business?”

“Microsoft, the world’s most valuable company, declared a profit of $4.5 billion in 1998; when the cost of options awarded that year, plus the change in the value of outstanding options, is deducted, the firm made a loss of $18 billion, according to Smithers.”

The Economist, 1999

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3 Comments

  1. uberVU - social comments said,

    April 25, 2010 at 7:33 am

    Social comments and analytics for this post…

    This post was mentioned on Identica by schestowitz: #Microsoft Debt Almost Doubles to About $80 Billion in Just a Few Years http://ur1.ca/wzal #fraud #deficit #sec…

  2. Tom Womack said,

    April 25, 2010 at 7:47 am

    Gravatar

    I think you’re misreading the graph at Business Week; Microsoft’s chunk is the red bit between about 71 and about 75 billion, they have $3.75 billion of bonds outstanding, as part of $22 billion in debt (http://www.microsoft.com/msft/reports/ar09/10k_fr_not_03.html)

    Which isn’t unreasonable since they have $36 billion in investments, including $13 billion in Treasury bonds.

    your_friend Reply:

    Turning a $60 billion cash pile into questionable “investments” said to be worth $36 billion while taking on a real $22 billion in debt is reasonable? To who? The deeper into debt Microsoft falls, the harder it will be for them to conceal their failure.

    Non free softare has never been a sustainable business model. This is why Microsoft has invaded media and the web. It’s not working out for them for the same reasons their software business is not. Everything Microsoft buys, it wrecks trying to feed Windows. Customers don’t like it and Windows itself is a basket case. The apparent success of Windows and Microsoft in the 90s is really the story of many other non free software company failures.

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