11.16.10
Confirmed: Microsoft Still Manipulates Financial Reports
Summary: A real case of investigative journalism from Paul McDougall shows that Microsoft misreports its results
MICROSOFT is not new to fraud charges. Even when the company hit its peak value (or thereabouts) the company was caught manipulating reports, after a whistleblower showed evidence. Microsoft later paid him several millions of dollars to drop the charges and go away, but the SEC did not go away. This whole story and many others can be found in our wiki. There are some more recent allegations as well.
Let us bear in mind that Windows profit declines despite Microsoft cheating by the numbers as Paul McDougall helps reveal: (thanks go to Girts for the pointer)
Microsoft’s most recent Windows sales totals got a boost from the fact the company quietly added revenues previously assigned to other groups to its operating systems unit, a bit of accounting legerdemain that, along with other bookkeeping moves, helped the Windows group post big gains in the past quarter, according to an InformationWeek analysis of the software maker’s SEC filings.
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Just leaving Bolzano after three nights here for SFSCON (a small but perfectly formed FOSS conference). Passing through the tiny airport I noticed an unusual security requirement – which was being actively enforced. Despite apple strudel (that’s a delicious, giant pastry filled with spiced apple and mixed berries) being a major tourist item on sale in Bolzano, it’s banned on aircraft here.
There are surprisingly few comments on this article, which is an exclusive. More people need to see this. One commenter says: “Given that the reason Microsoft’s share price has maintained its price is due to what is happening in its three traditional core businesses, could Microsoft be burying underlying sales and growth problems simply by the way it uses inter-business charges? After all, investors have now become so blasé about the fact that Microsoft is bleeding around more than a $1B a year in its Online Services Division, what matter whether it loses $1B or $2B. However, adding another $1B to the three core business makes things look somewhat rosier than perhaps they really are.
“Questions should be asked, more especially given the recent sale of $1.3B shares by Microsoft CEO Steve Ballmer.”
Not just questions should be asked; lawsuits should be filed, too.
Here is another such post which relies on the above as its source and adds:
Microsoft declined to comment on how the company’s Windows division gained the extra $259 million.
Why can’t Microsoft comment? Probably because it’s true. Let us remember that Microsoft’s former CTO quit the company and was paid to keep quiet
Novell admitted playing the bucket game several years ago, which leads to the question: shouldn’t shareholders be allowed to receive compensation if they sue the company for misreporting figures while it’s public traded? Shouldn’t the SEC step in again? █
“One strategy that Microsoft has employed in the past is paying for the silence of people and companies. Charles Pancerzewski, formerly Microsoft’s chief auditor, became aware of Microsoft’s practice of carrying earnings from one accounting period into another, known as “managing earnings”. This practice smoothes reported revenue streams, increases share value, and misleads employees and shareholders. In addition to being unethical, it’s also illegal under U.S. Securities Law and violates Generally Accepted Accounting Practices (Fink).
–2002 story about Charles Pancerzewski, Microsoft
Content is available under CC-BY-SA
twitter said,
November 16, 2010 at 7:46 pm
It’s good that they debunked the double didgit growth lie, but a more careful investigation would reveal declines. Sadly the author ignores last year’s deferred revenues and repeats Net Application’s nonsensical market share numbers. As I mentioned previously, when the deferral fraud is removed, revenues were essentially flat despite growth in the global PC market. Revenue shifting plus deferred revenue turns the balance negative. No wonder Microsoft is so loud these days. The Windows business is not healthy as starving retail and OEM partners will tell you and Information Week should have asked them.