Bonum Certa Men Certa

More Microsoft Debt. “This Could be a High-class Ponzi Scheme.”

"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



Summary: As Microsoft returns to buying its own stagnant stock, Microsoft boosters view it as an admission of failure and Pogson, a Microsoft critic, says it "could be a high-class Ponzi scheme."

"Another Year Older, A Little Deeper In Debt," says Pogson's headline regarding Microsoft's debt. He too suspects that Microsoft is not telling the whole truth about its financial situation (which it paid its former CFO not to talk about).



M$ is increasing it dividend to shareholders and paying for it with an issue of long-term notes. To pay some of them back they will have to be in business for another 30 years. Do you feel lucky, punk? I would not count on a company with decreasing share and being hated by many customers being in business that long, would you? This could be a high-class Ponzi scheme. Why is a company awash in cash and taking in $billions in sales borrowing money?


We wrote about Microsoft in relation to Ponzi schemes before [1, 2].

Microsoft has just hidden a lost division inside a very profitable one. Chips B. Malroy called it “the shell game of hiding loses, moving divisions around that are losing too much money” (here is Microsoft's SEC filing).

Matt Rosoff from a Microsoft booster called "Directions On Microsoft" has just published a daring article in Business Insider:

FINALLY: Microsoft Just Stopped Pretending It’s A Growth Company



[...]

Microsoft’s after-market announcement of a 23 percent dividend increase, bringing its quarterly payout to $0.16 per share (a yield of about 2.5 percent), is the next step in a transition I first began to notice this July at the company’s annual meeting for financial analysts.

For most of its history, Microsoft has tried to present itself as a growth company. The market clearly disagrees—the company’s P/E ratio sits at less than 12 this morning, which is more typical of a value company than a booming tech company with huge future growth potential.

Microsoft finally appears to be coming around to this point of view itself.


With layoffs and dying/dead products, Microsoft has not been a growth company for a very long time. Microsoft cannot live on a diet of Windows and Office forever because they don't sell so well anymore [1, 2] and Microsoft gets downgraded as a result [1, 2].

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