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SEC Settles Microsoft Accounting Investigation
guttentag writes "The Securities and Exchange Commission has wrapped up its two-year investigation into Microsoft's accounting practices. The investigation focused on "cookie jar" accounting practices in which a company reports that it earned less money than it actually did, secretly storing the unreported money to artificially boost earnings in the future. The SEC called off its investigation in exchange for Microsoft's promise that it will not break the rules in the future, though the company is not admitting that it broke rules in the past. Microsoft publicly states that it has $40 Billion on hand." Gates realized a long time ago that regardless of actual performance, if you "beat estimates" people will buy your stock. So, he's arranging it so that no matter what the actual performance is, Microsoft always "beats estimates". If your analyst estimate is low 61 out of 63 times, either A) you need a new analyst or B) someone is feeding the analyst bad numbers. In this case, probably both.
using microsoft money. of course the accounting is flawless.
I wonder if MS pulled the same stunt with the IRS.
Or is this how the SEC figured out something smelled about MS' accounting?
Someday, you're going to die. Get over it.
The only time a company has to make its numbers known publicly is in its quarterly reports to the SEC. Any whisper numbers that are passed around by analysts are simply that - whispers.
And you really answered your own question. Why does an analyst guess wrong 61 out of 63 times (in favor of better stock performance)? Because they can make more money that way.
There is something rotten, but it isn't in Redmond. The stench is coming from Wall Street.
I have been pwned because my
I'm highly preturbed! It must be an accounting glitch, nothing more.
We all know that a company such as Microsoft with its high upstanding ethical and moral values would never do anything to mislead the common investor.
Microsoft stock is worth less than 50% of its value about 2 years ago so it doesn't seem to be working anyway.
Grrr; the referenced site complains that I'm not using a """modern""" browser when I tried the link in Linux Opera. Anyone have a different link?..
Anyone who uses an analyst's recommendations as anything other than a source of humor needs to seriously reconsider their actions. Here's another great example of how "accurate" analysts are. Merrill Lynch is one of the worst.
Just my $0.02.
Remember what Microsoft has been saying all this time regarding software piracy? Since we're talking copies they never made being sold for money they never got, along with losses they've claimed where none physically existed (If you make one million copies of software that sells out, and someone makes one million copies of their own to give away, then they haven't technically lost any money, as they never made that additional one million copies to begin with), I would have to definately say they were using the cookie jar tactic here as well...
Just because you can mod me down, doesn't mean you're right. Shoes for industry!
isn't that fraud? sounds like the irs should pay microsoft a visit....
Ho hum, the usual story, from the usual people.
The real bad guys here are probably the auditors, since they are supposed to find stuff like this and make sure it doesn't happen. People in the know are aware that audited financial statements are just bullshit backed up by a promise that means just about nothing. There is still good info in there, you just need to really read between the lines and pay attention to what the company does not have on the balance sheet.
"It's not a war on drugs, it's a war on personal freedom. Keep that in mind at all times." Bill Hicks
It's a sad day that the SEC has succumbed to political pressure from the Bush administration.
The SEC, like all alphabetical soup organizations (IRS, FBI and the forth) were set up to serve NOT the gummint, but rather, to serve IN THE INTERST OF THE PEOPLE.
The principal function of SEC is to make that the corporations don't CHEAT the public, whether through mirky accounting practices or through underhanded manipulation of (stocks, cash, influences, et cetera) and in this case, the SEC has capitulated under pressure from George W. Bush administration.
It is a SAD, SAD day.
We had Enron fiasco, and I thought we had learn some lesson from that, but it looks like well
Sad, really sad.
The only consolation is that I did NOT vote for Bush.
Muchas Gracias, Señor Edward Snowden !
With so much product theft how can they make profits?
:)
"Evaluation = Evolution"
Ah, the old $40 billion fallacy.
People seem to forget that Microsoft is a publically traded company. All of that $40 billion is owned, not by microsoft, but by the shareholders.
If Microsoft stock starts to go down, and people panic and sell their stock, that $40 billion evaporates. As that $40 billion disappears, their stock will drop even faster, and more people will sell.
MS may have $40 billion in the bank, but they've also got $40 billion in IOU's to the public who own stock.
"The SEC called off its investigation in exchange for Microsoft's promise that it will not break the rules in the future,"
Compare: Ok, Mr Dalhmer, we'll not look into the funny smell if you promise not to kill and eat anymore people, while keeping other parts of them for sexual "funning."
See, in the country I live in, we usually prosecute entities (people, companies) when they break the law. We don't just say, "well, don't do it again."
--
Internet Explorer (n): Another bug -- that is, a feature that can't be turned off -- in Windows.
So basically the SEC got their dicks sucked by m$'s accounting firm. ah, the sweet irony.
Most corporations usually don't have the luxury of beating estimates with large unreported cash reserves. In a twisted way this showcases the strength of Microsoft's business model giving them the ability to ride out the hard times. If I was a shareholder, I would approve so therefore Microsoft is doing what any good corporation should do, increase shareholder value. Obviously the risks of legal action do not outweigh the benefits for the company so in a sense this is just a good business strategy.
A promise? I'm not statisfied with that. I hope they made microsoft pinky swear they wouldn't do it in the future. Or at least say their mom will step on a crack and break her back.
I agree 100% with parent. Looking at those graphs, you should expect (hope) to see (A) a downgrade [red icon] at the peaks, and (B) upgrades [green icons] at the troughs. I counted exactly none that meet that description. Jesus, how shoddy is that?
To make laws that man cannot, and will not obey, serves to bring all law into contempt.
--E.C. Stanton
two good links on Microsoft's financial fraud.
u le maker000217.htm
http://www.fool.com/portfolios/rulemaker/2000/r
http://www.billparish.com/msftfraudfacts.html
Lawyers, MBA's, RIAA? A jedi fears not these things!
In fact the $40 billion in cash puts a floor on how low the stock can go, since the stock shouldn't drop much below the breakup value of the company (what you would get if you bought the whole company, sold off the buildings, etc and took the $40 billion for yourself). Of course with a market cap of $275 billion the breakup value is a long way down.
- adam
L0l j00 R F|_||\||\|Y!!!
Nothing new here, just another case of Microsoft doing something wrong and the resolution to the problem is that nothing happens to them. And when they get caught doing it again, nothing will happen then either. Funny it doesn't work that way if I get caught.
I'm an American. I love this country and the freedoms that we used to have.
Gates realized a long time ago that regardless of actual performance, if you "beat estimates" people will buy your stock. So, he's arranging it so that no matter what the actual performance is, Microsoft always "beats estimates".
In order to do this, you would have to REALLY beat estimates one quater, say by $0.03 $/share so that you could save some it for later quaters, but if you didn't beat expectations, you wouldn't have money to save.
The plural of moose is meese. Go back to grade school.
I have been pwned because my
what is the annual budget of the u.s. gov. ?
2trillian which is 50 times more than 40billion, think of the possibilities of what you can do with that, and look at our world
Can I lie to my bank or the taxman and pay no penalty if I promise (when caught) not to do it again in future? Pleeeeeeeeease???? Just this once!!!!!!
Life must be sweet.
-b
Listen, M$ is in *NO* way like Enron. It's amazing how you zealots place blame. Enron was involved in price fixing and an artificial energy crisis. If I even hear someone say "That's just like MS," then you're too young to remember when an OS used to cost $300. Most people don't even "pay" for Windows.
.COM bust of the past few years, M$ is a blue-chip stock. Forget OSS, forget all M$'s shit... If you were sending you kids to college on their stock, you'd be a happy person...
I'm not here to argue the merits of M$ software, but I am here to point out that they *DO* create shareholder value, and as a company they perform very admirably. Compared to the stock market and the inflated
Let's put things in perspective here folks..
48% for both. though Gore had a few more votes in total, it was nothing like a 60/40 break. it would be theoretically possible to win w/ those numbers against you, but very unlikely in the real world
p re sident.html
http://www.cnn.com/ELECTION/2000/results/index.
who gives a shit, fucken spelling nazi.
:-P
I understood him, you must be aliterate
However, if I don't actually do anything but make it look like I'm perpetually increasing the profits of my company, I'm duping society. You end up with one person getting rich by selling high valued stock, while another person (who buys that stock) gets poor. Nothing is produced. Money is simply changed from one hand to another: the zero sum gain.
You mean a stock bubble... that never ends. Wow... just think about that for a moment. What if the dot com bubble never ended. How many dot com companies were just get rich quick schemes or other scams?
I would suggest that your example actually is a negative sum gain... someone is gaining money through slight of hand; it's a con, theft, robbery, whatever.
On a slightly different note, I hear tulip bulbs are all the rage.
1) There's nothing wrong with a consistently conservative estimate.
2) If you underreport earnings you are actually undervalued. You may iron out the noise but you have sandbagged real money on the books for a quarter.
...also get the quarterly reports and portfolio accounting for everything MS has done, and plans to do. Analysts work from this information.
I'm glad this investigation was dropped.
>think of the possibilities of what you can do with that, and look at our world
... that the taxpayers and companies (small ones, not the ones that manage to get out of paying corporate taxes, e.g. enron, MS) of the US would want it spent on _them_, seeing as they pay the taxes to begin with.
Must be nice to own a president. I hope that this cost microsoft at least a couple of million dollars to buy off the bush administration yet again. This is the second time that MS had to buy off the politians in two years.
He, and others, are simply hacking the economic structure. They insert an extra NOP to better the timing, they tweak their routines. Is it any surprise? Finance is a game, with a huge set of rules, and a very bugger compiler (see if you get my anology). They are not being evil, they are playing the game. As others have pointed out, this is no fault of Microsoft that they are good at it.
Somebody from the SEC ought to have asked the people who got the consent decree out of Microsoft in its first antitrust case just how reliable Microsoft is at keeping its promises. Expect another SEC investigation in a couple of years or so.
Be who you are...and be it in style!
SEC: Microsoft, did you use illegal accounting practices to cook your books?
MICROSOFT: No sir. Never!
SEC: Ok. Well, don't do it again.
MICROSOFT: Thank you daddy Warbucks!
See http://slashdot.org/comments.pl?sid=33571&cid=3629 298 , to see the point of the post, because some people are too godd@mned stupid to use their moderation scores properly...
Just because you can mod me down, doesn't mean you're right. Shoes for industry!
For the love of god, the term is "Zero Sum Game", not gain. It comes from a section of maths known as game theory, go look it up if want more info.
--
Simon
Sorry, but what the fuck? They're "agreeing" to what exactly? To obey the law? To continue doing exactly what they're doing right now (whatever that is)? What kind of "agreement" is this?
Quo custodiet ipsos custodes? I'd be very interested in knowing how many of the SEC people involved in this "investigation" have suddenly found themselves able to pay off their mortgages, or fund their kids through college. And no, I am not joking. When you're dealing with a company with $40 billion in the bank and bad accounting practices, squirreling a couple of million in a slush fund is trivial. I mean, how many people at Microsoft actually believe that they know exactly how much money Microsoft has - and how many different figures would you get if you asked all of these "authoratative" figures?
This "nothing to see here, move along" investigation is a farce. They are either innocent, in which case there's no "agreement", or they are guilty, in which case they should get reamed. This stinks.
If you were blocking sigs, you wouldn't have to read this.
See, in the country I live in [www.gc.ca], we usually prosecute entities (people, companies) when they break the law.
You have discovered one of the fundamental truths of America. It's the same reason we bailed on Kyoto accords et. al. Big Business calls the shots. As such, the Evil Doers of the Board Rooms, out of Professional Courtesy, tend to let each other get away with it. And thus, one hand washes the other.
I'm not saying that's good or bad, but I do notice that Canadian currency is worth about a half penny less (in USD) each year. A bit of a paradox, really. If the US won't institue the Corporate Death Penalty, we have an unfair economic advantage over countries with stronger ethics. This tends to make other countries lower the bar in order to compete. Those that don't aren't as economically powerful as USA. But, it's also nice to live in a country where your health care isn't tied to your employment status.
To paraphrase Vince Lombardi: In America, money isn't everything. It's the only thing.
If you commite a crime, you are nailed, and may get away with suspended prison time... If you commite two crimes, you go to the slammer...
If you are M$ you get a pat at your back... and a public admonition for you "don't do that again... please."
And i thought that justice worked in the US... How wrong i was...
Cheers...
you can eat. It's Microsoft! GWB is sure taking his job seriously.
Oh my god! They're loosing money? They better tighten it!!
I am going to go out and break every fricking law I can unti I get caught, and then plead to the court that they have to let me off if I promise not to do THAT again... as the microsoft cases have set precedent that you dont get in trouble for anything the first time you are caught.
The United States Government... the best government money can buy!
Go to my weblog and click on the Bill Parson's link on right hand side menu..
..Companies with similar Lobbying efforts with same SEC result of slap on wrist:
Than click on the analyst link and read it..
MS has been using fraudalent accounting wrose than Enron for about 10 years..
Now let me ask you why Enron's accounting practies got all the press and SEC focus and not MS?
Can we saw MR Bush got bought?
You think I am kidding
CISCO..
Don't Tread on OpenSource
The settlement does not involve any fine, with Microsoft agreeing to accept a cease and desist order.
This means it will not engage in unspecified accounting practices that the SEC had been investigating. The agreement does not involve an admission of wrongdoing by Microsoft.
Microsoft has repeatedly settled with the DoJ by agreeing to cease and desist it's anticompetitive practices, and subsequently continued to engage in the exact practices identified in past trials. Is the SEC stupid or corrupt?
Stop-Prism.org: Opt Out of Surveillance
Comment removed based on user account deletion
Gov't: We'll let you go if your *promise* not to commit any more crimes.
MS: Uh, okay.
Gov't: Cross your heart and hope to die?
MS: Yup.
Gov't: Stick a needle in your eye?
MS: Yup.
Gov't: Eat a horse manure pie?
MS: Uhhhhh...yup.
I have no sig, does anyone have one to spare?
What makes you thinnk it's an either/or situation?
The real news in this is not so much that MicroSoft did something bad, but that yet again another big American blue chip is caught playing with its stock price. It seems that stock manipulation is all that CEOs are good for these days. The 90s were so damn good to some people that it really went to their heads, and I think it will take a few years for it all to shake out. Its not just the MicroSofts and Enrons or the entire energy industry, but also the little players like Critical Path or XO Communications (2 stocks that I am sucker enough to own).
I look at the stock market these days like its a leper. I mean, should we trust the research analysts? the company execs? Jeez what crap. Maybe next year.
America had it so good for so long (the 90s was the longest ever economic expansion) that many fell victim to the age old weakness - hubris. Amazing how repetitive we humans are. Its all documented perfectly in any child's collection of greek myths.
Of course the sweet part is that if you are a CEO you just tell the SEC - "hey, sorry" - and you turn around and lay off 10% of your workforce to help cut costs and keep that stock looking good.
Man, can't be so bad being on top.
I'm surprised they just didn't blame it on excel rounding errors.
I think this is the key statement in the story post. There is corruption EVERYWHERE in the finance industry. This includes the government, corporate management bodies, and the people (both in the media and the private finance industry) that make money off of reporting on companies and the government.
Enron is by far not the only company with a corrupt management that artificially inflated their numbers throughout the late '90s and early 2000's. It just happens to be the first company to get caught by the national media red-handed. Nearly every failed dot-com with a successful IPO did the same things Enron did, such as under-reporting liabilities by giving much of their compensation in stock options and B.S.-ing about projected billions of future revenues from customers that would never exist. Other more traditional companies like Xerox and Polaroid have also been caught doing the same sort book-cooking. If it had turned out that Microsoft was not engaging in such accounting tricks, Microsoft's board would clearly be in the small minority of the Fortune 500 in that regard.
The government, both under the Clinton and Bush administrations, did virtually nothing to reform regulations that were being exploited legally but unethically by corporations around the U.S. and also virtually nothing to punish those executives engaging in insider trading and other practices that have been illegal for decades. Had the government stepped in and set some reasonable rules, the boom of the late 90's would have been much more reasonable in scope (Dow 11K and Nasdaq 5K would never have happened, but the gains in stock prices would have still been substantial and, most importantly, justified) and we'd still be in very good economic situation now. Unfortunately, the watchdogs were either sleeping or put to bed (by some well-placed "bones" if you get my drift), and did not attack the biggest ripoffs since the late 1920's that the U.S. stock market has seen.
And the media and the analysts glorified everything that was going on. Back in 1998 and 1999, I was shocked at how many companies' stocks had been given "strong buy" upgrades AFTER A RISE of 20, 30, even 50 percent in the previous month or two. WTF? Any person with a modicum of experience in the market would take such a dramatic increase as an opportunity to cash in a portion of his/her holding in that stock for short-term gain or to stand pat if the holding was for a long term investment. To do as these analysts were suggesting would be essentially refusing to pay $10 for something because it's overpriced, but to buy two of that thing when its manufacture raises the prices to $20. In fact, it has been alleged that some analysts were in fact trading against their recommendations, upgrading stocks that they wanted to take profits on and downgrading stocks that they themselves had wished to accumulate.
As the saying goes, "you can fool all of the people some of the time, some of the people all of the time, but not all of the people all of the time." The "some" time in the first part of that statement began to end in the spring of 2000, and many more woke up following the Enron debacle. Only now are we beginning to understand how broken the regulatory structure necessary for a successful, mostly capitalist (but obviously not pure capitalism) was in the U.S. in the 1990's. Just like it wasn't until after 1900 Americans didn't understand why having an economy dominated by a few "Robber Barons" was bad, or not until the 1930's was it known why having a market based on uninsured banks and buying stocks on margin was bad. Many of the flaws in the U.S. financial system WILL be fixed. At some point, the American people will not accept anything but a good-faith effort to correct these problems. At first, the existing government will be given a year or two to make the required changes. After that, people will begin to demand a "New Deal" and clean house on Capitol Hill. If things don't change significantly by early 2004, the voters will bust out the brooms in November of that year.
However, it is likely that we will endure another period of economic ugliness like we did in the 70s before things brighten signficantly. It took nine years (1973-82) for the U.S. to determine a successful course of action after the end of the Vietnam War required the nation to turn away from a largely military-industrial economy to one better suited for a peacetime environment. My guess is that it will take until at least 2006 or 2007 for the U.S. economy to rationally handle the changes effected by the so-called Information Revolution and prosper again. Things won't be horrible between now and then (barring any further Sept. 11-scale or greater terrorist attacks), but they probably won't be peachy either.
People have rightly questioned the integrity of the entire financial system and are waiting for things to improve before increasing their commitments to it. As a matter of fact, the U.S. is the last major market in the world that has been challenged by investors: while Japan, Europe, and later Latin American and southeast Asia floundered, people flocked to the U.S. believing that our system was infallible. It was not, and never will be infallible, though it has been and will become much more sound than it is today. As the next couple of years unfold, people will gradually learn what the biggest reasons for the unsustainable bubble and subsequent bust were and proceed to try to correct them. After that, people will begin to regain faith in the market, they will begin to realize that current valuations of stocks are by-and-large reasonable again, and the U.S. economy will begin to poke its head out of the clouds.
The stench of corruption right now is everywhere. We're just going to have to give ourselves a while for it to subside.
If M$ really does have $40 billion in cash on hand, think about how that sontributes to their bottom line. Assuming that this is all in cash and not stocks or bonds, the annual interest income on $40 billion even at 2% in a standard savings account is about $800 million. If it's in higher yield securities (T-Bills, or other US Treasury backsed securities, this could very well generate over $1 billion annually.
So what you are saying is that Microsoft is like a money market fund that DOES NOT PAY A DISTRIBUTION??? Is this what you meant?
MICROSOFT IS SUPPOSED TO BE A GROWTH STOCK!!! Why any investor would buy such crap at current prices is beyond me. Microsoft in its glory days was allegedly making a return on equity of ~40%! Now you are bosting that they make ~2%! Did you think about this before you wrote?
You are only 'good' at at game if you can win it without breaking the rules. And the whole point of the SEC inventigation was to see if they did. Now they have agreed to not break the rules they didn't break in the first place if the referee won't look at what they are doing.
Heh. Just thourght it was a good time to bring up good old Bill Parish who spend some time a couple of years ago looking into MS accounting pratices and claimed they don't really make money at all... Haven't been updated since November 1999 tho.
http://www.billparish.com/msftfraudfacts.html
INTC, CSCO, and other big cap computer related companies have been pulling this stunt for years.
I hope the SEC is successfull in changing reporting rules.
See, in the country I live in [www.gc.ca], we usually prosecute entities (people, companies) when they break the law. We don't just say, "well, don't do it again."
So do we. The thing is, Microsoft didn't break any laws here. But they may have broken some regulations enforced by the SEC.
"And like that
Windows 2000 Professional is going for $271.88 at the first reseller I looked up.
That's close enough to $300.00 that the other guy is basically right.
Small wonder gcc's such a pain in the arse.
Eloi are stupid, throw morlocks at them!
Another popular one is a boss ordering a $100 product from India and paying $10,000 for it. The supplier gives his client the product PLUS $9,900 as a present to his own personal account in Cayman islands or whatever. If the Indian IRS tries to investigate, in that part of the world you just give the tax inspector $100 and he'll say, "Nothing to see here, move along now". As IRS controls become tightened, we're going to see more corruption to get around it, Bill Gates meeting the CEO of Sun in dark alleys, whilst a Bill Gates lookalike is at a product launch on TV or something, so that's Billy's alibi.
People won't try to fix the US banking system after Enron, they'll just blow hot air until everybody's forgotten about it just like BCCI... Ooooooh, jogged some memories did I? Forgotten about that hadn't you? The collapse of BCCI was supposed to trigger this big change, destroy corruption and make everything transparent, but it didn't - why exactly?
Read my lips - the banking system changes for nobody, you might get some token changes because the banks want to look liek they're doing something. After WTC everyone's gonna cut the banks some slack and they'll have us by the balls again after Enron blows over.
Nope. In the war against terrorism, everybody's supporting the President, nobody will care about Enron in a few months.A caveman dreams of being us, the incalculable power and riches. We dream of being Q, then what?
You did miss a critical point, though.
First, to be totally up front my family has been involved in the financial planning market for over three decades. My grandfather and father are principals of a private investment planning firm in Missouri. I do not work there, nor am I a broker in any way. I have grown up around this industry.
The stock market of today is used by many people as a wealth-generation tool. People think that the stock market is around to help people make money.
As part of this, investors crave information. Lots of it. Thus the analyst industry was spawned. This area is rapdily turning into a "buddy" network, and getting more corrupt all the time.
You see, quite a few analysts work for large brokerage firms, and their income is based on the activity in the stocks they analyze. Good, bad, doesn't matter - just get the performance.
See a problem there? It's starting to get noticed by the SEC, but that's just a start.
Companies will do anything to get a good recommendation from an analyst, and blackball ones that give bad recs.
Moral - don't trust an analyst. Do your own research. And hope you don't get screwed anyway in the end.
"But we decide which is right, and which is an illusion"
How much money is Microsoft actually making? The prise rises they are doing are actually hurting their marketshare.
Stop it. Please stop deluding all of us.
The great depression, the SEC, the Federal Reserve Bank, Congress, the House and Senate, the Executive Branch, the farm subsidies, the steel subsidies, the income tax exemption for mortgages, the local police, the FBI, the CIA, and the military, (and endless more examples) these are all either evidence of or organizations put in place to deal with the fact that the free market results in people with power that use that power to take advantage of people with less power.
That's what a free market leads to. This country can't handle a free market, and everyone holding strings to pull knows it.
:tirade off
Sorry. Thank you.
Microsoft Testimony (a' la Bart Simpson):
1. We didn't do it. You can't prove a thing. No one saw anything.
2. We double-cross (heh) our hearts-hope-to-die-promise won't do it again.
D'OH! Did we say again? Since we never did it, how could we not do it again?
Yeah! Huh? What? Uh, wait, Your Honor, that's not what we meant either...motion to strike our ignorance from the record!
This may just be me but something isn't right here:
Last week the wall street journal quoted a source at the SEC as saying that MS would face charges for misrepresenting its revenues.
Now the matter is settled in return for "A promise not to do it again" essentially the same terms that the Antitrust case was settled on.
If I didn't know better I'd think somebody in the higher levels of governement was pulling some strings here. (sarcasm mode off)
The response by the SEC to Microsoft's funny accounting methods couldn't even be described as a slap on the wrist. But apparently, Microsoft was speculating on its own stock knowing what the numbers were going to be. Some people believe there are going to be lots of lawsuits from those who lost money speculating as a result of the 'cookie jar' accounting methods that Microsoft used. I have no idea whether their lawsuits stand any chance however.
Try this instead:
http://finance.yahoo.com/q?d=c IOW hard goods, and I picked 'em cuz they were the first such company that came into my head)
~REZ~ #43301. Who'd fake being me anyway?
When a company is liquidized, the creditors
(i.e. banks) get paid first BEFORE any
shareholder sees a dime.
So, the CREDITORS own everything, the shareholders get whatever is left over.
It's a simple question that really has a simple yes or no answer. Anything else is just an deceptive excuse.
Not really, since the shareholders own the company, and the company owes the creditors, the share holders owe the creditors. Creditors get paid what they are owed, everything else goes to the owners.
All software and services companies vary the way they recognize revenue.
They can recognize the revenues as the contract is sold, Amortize it over the life of the contract, or recognize it when the contract is completed. or recognize the full value anywhere inbetween when sold and when completed.
The laws give Microsoft the leeway to "reserve revenue."
It is also in the best interest of the company to hold back revenues and earnings if possible as taxes will tend to eat up additional earnings and prove to be no benefit to the company.
The problems occur when companies tend to recognize all sales when the contract is sold and do nothing if the full vlaue of the contract fails to materialze.
Microsoft has always had very conservative accounting practices, that is why the analysts love the company, not because Microsoft always beat the analysts. Microsoft beating the analysts will piss them off almost as much as not meeting expectations. Analysts liek to the 100% right, if they are 100% right, then their value as an analyst increases because it is more difficult to be 100% right. But the analysts know one thing, a conservative company like Microsoft is a mainstay of a portfolio and over time will always increase in value relative to the market over time.
However, it is likely that we will endure another period of economic ugliness like we did in the 70s before things brighten signficantly. It took nine years (1973-82) for the U.S. to determine a successful course of action after the end of the Vietnam War required the nation to turn away from a largely military-industrial economy to one better suited for a peacetime environment.
umm in the early 80s we just shifted to nuclear stockpiling and a cold-war economy with a much larger defense budget than what we had during or directly after the Vietnam War. Essentially, 73-82 was just the period between war-time economies, though the 80s didn't involve a lot of heavy military involvement.
Communism? Socialism? Mercantilism? Anarchy?
;)
The free market and capitalism is certainly not the perfect system; but it's the best one we've yet come up with given human nature and our current capabilities. It's naturally evolving, of course, and will probably evolve into a better system that we haven't yet discovered.
And if you think things like the police or military (never mind the other branches of government) are necessary solely due to the free market, you're a crackpot...
shoot ...
If I got away with murder, (unproven non allegation just a phrase) if I got away with unfair and illegal business practices, AND then got away with all this other crap (ie putting programs integral to the o/s even after being told not to), and then continuing to force companies who want to sell my product to sell it with every computer they sell, AND then
well you get the picture, why not?
I think is an incredibly insightful comment, and I encourage you to follow up on it more.
For my part I see a couple deep problems here:
The market is meta-capitalism - that is, it's not making money through doing anything, it's more or less making money through a loan. Risky loans, as they involve to trying to put a dollar value on a very complex operation (a sizable business) involving personal and economic dynamics of negotations between entities. One don't have any problem with the captains of Solomon Bros, etc losing their silk shirts, but I don't think people really understand the risk - particularly not working-class 401k contributors who are led into bad loans by well-connected shysters (Enron), or people who invest in mutual funds who rely on shyster analysts.
Another problem is:
Making money for money's sake is fundamentally incompatible with another function of the economy, which is to deliver services to people (I'd rather not use the word consumer, because I think it doesn't leave room for economic transactions that improve quality of life - e.g. working on your neighborhood' park cleanup effort, or working on another neighboorhood's park cleanup effort). Is there any way to reestablish the ethic of doing work for its own sake?
Another thing y'all may be able to fill in is a comment a friend made to me. He said:
The market is really driven by the big investment houses: Solomon Bros, JP Morgan Chase, Morgan Stanley, etc. Index prices mostly react to the movements of huge amounts of money in these kinds of institutional transactions. Do you think this is true?
To me it reflects on a situation I think is unfortunate: the government is current afraid to assert its authority over big business because big business basically threatens to put a lot of people out of work (political death) if they don't get what they want.
I don't know why, but it seems like most Americans have this notion in their heads that when they vote, it has an impact on which president gets elected. In about half the states, this may be true. However, in the other half of the states, the electoral college (That body of people whose votes actually decide which president is elected) is not required to comply with their state's popular vote.
r al _college/electoral_college.html
This is not news, popular votes and actual election results have differed several times in the US's history.
It's all there in black and white.
http://www.archives.gov/federal_register/electo
The slashdot blurb focuses on Microsoft's delaying earnings to smooth out earnings reports and make sure they keep better expectations. Here is an article that explores the hypothesis that Microsoft is hiding earnings because as a monopoly they want to control the impression of success. "Well, when you're a
monopoly, churning out what some anti-capitalists believe are obscene
earnings year after year, you just might find it in your best
interests to hold back a bit, this analyst says." I think that this hypothesis is more severe than the smoothing hypothesis. Smoothing earnings is somwhat benign, your just covering up volatility. Hiding earnings over the long term to descrease the bad taste of being a monopoly is more corrupting.
That's an odd question, because there are many reasons why people do work, but whether any of these are "work for it's own sake" is open to debate. For example, if a person builds model ships because he enjoys doing it, that might be "work for its own sake," depending on your definition. A significant amount of free software is developed under this ethic. There is an important point, though, I'm not going to build my model ships and give them away to people who want them unless those people are my friends (or maybe occaisionally on a whim). If I were to start a small business where I made such ships and sold them at a small profit, it would likely be more hassle than it is worth. So, I might make a ship to give to my cousin's son, but I wouldn't give it to you, and I also won't sell it to you. (Like I said, the minute it becomes the hassle of running a business, hiring accountants , complying with regulations, it stops being fun.)
I don't really consider altruism as "work for it's own sake," but perhaps this is what you meant. I might do altruistic work for people I know, or for the local Buddhist Temple where the monks are always nice to me, but I won't do it for people I don't like. The trouble with this is that people usually don't agree on valid reasons for disliking people. Honestly, altruism works better in tightly knit societies. It's doomed to failure as a way of getting things done in diverse societies. (People might also do work for religious reasons, such as to make merit to do "well" in their next life. However, if you do altruism to gain "treasure in heaven," then isn't that a kind of selfishness? There is a "gain" involved.)
Now, you might also mean taking pride in the work you do, even if it is for a profit. That's another matter altogether. For example, I think the thing that makes people sick about doing work for money is that so many people act like it is more valid to scam someone, and do crummy substandard work and get paid through the roof for it than it is to do good, productive work and make money on that. What do you expect? If you scam people, you do better than if you are honest. You won't pay as much in taxes if you are a huckster than if you are an honest man, you won't have to comply with as many government regulations, and you won't have any politicians in your back pocket who can regulate the economy such that you become a monopoly or part of a cartel while your competitors who won't or can't afford to play ball are crushed underfoot. I've watched crummy, corrupt businesses crush decent businesses (Bleem!) under foot using the courts. I've watched the media cartels pay the government to try to force computer manufacturers to sell screwed up, crummy, substandard computers and the issue is being sold as an aid to help consumers get broadband.
So I don't have any confidence in government fixing these types of problems. How can the government which brings us the DMCA bring us regulation to end corruption in finance?
All the creatures will die, And all the things will be broken. That's the law of samurai. (Jubai, 1605)
we crucified enron but we're letting microsoft go?!
W T F?!
they're a known criminal who uses underhanded business tactics.
I'm a bit out of the loop, but with wallstreet looking into everyone who looks fishy, shouldn't microsoft be on top of the heap?
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Oh contraire - "regulations" are in fact so close to law that mere mortals can't tell the difference. Regulations correctly issued by government agencies have "the force and effect of law" until overturned by a court of legislated out existence by Congress. There are lots of people in jail today because they broke IRS "regulations". So for all practical purposes regulations issued by governmental agencies are law unless you can get a judge or congress to agree that they are unreasonable. This has happened but not too often and the risks are generally great!
The SEC called off its investigation in exchange for Microsoft's promise that it will not break the rules in the future
You have got to be fucking kidding me. Microsoft is already a convicted criminal; calling off an investigation of them like this is no different than calling off all charges against a wanted criminal in exchange for their promise that they won't commit any more crimes in the future.
I pledge allegiance to the flag...
of the Corporate States of America...
For the most part I agree with what you are saying, however, it seems to me that many people leave out marketing when talking about economics. I would argue that marketing and advertising play a substantially greater role than many free market supporters will admit. Increasingly, consumers are making decisions based on marketing and advertising strategies aimed at them rather than on a rational evaluation of a product. The problem with this is that "superior marketing" does not guarantee a "superior product" so no real productivity gains are made and, therefore, no new wealth is produced.
I really think that increasingly sophisticated and effective marketing strategies are a greater danger to working markets than most any other issue.
Where can I get a deal like that? I go out, commit a bunch of crimes, and when I get caught, I cut a deal to get off the hook in exchange for my promise that "I won't ever do it again."
What kind of idiots do the SEC have investigating this stuff, anyway? Criminals don't respect the law - that's why we call them criminals. Why should anyone believe a liar, someone who has already committed crimes?
-- Ed Carp, N7EKG erc@pobox.com PGP KeyID: 0x0BD32C9B What I'm up to: http://intuitives.mine.nu
Part of the problem is that many people looking to buy stock won't buy it if the earnings for that company aren't spectacular. The companies found this out, and therefore did everything they could to jack their earnings, or earning reports, up. If the people weren't so stupid, and bought stocks that were "just decent" in the first place, we wouldn't be in this situation now. People just pay so much undeserved attention to these people who make virtually baseless predictions on these "whispers" that they will buy up anything they say is good. Just what these corporate giants want. It is no surprise that MS is using questionable accounting techniques, that can almost be expcected from any "giant". The bigger issue is that the people aren't smart enough to decide which ones are good companies on their own. I do not mean to say that the companies should do these things, or that they aren't responsible for them, I simply mean to say that the people should expect them.
When the market approached saturation, the American product-style system came to Britain where washing machines are designed to break down after five years ^H^H^H^H^H^H^H^H to not last longer than five years. I remember there being digust at the low reliability and build quality, the units weren't constructed by hand. The burden of disposing this number of machines was considered prohibitive. The Americans argued that as time progressed the design and efficiency of new washing machines improved, but these improvements couldn't propogate unless the old products were disposed of, thus the American system allowed technological progress. Of course the Americans won the day, my washing machine will die in 3 years. US culture ingrains into its citizen that cash is king, you are what you have, a man with a ferrari is a better man than one with a 15-year odl Lincoln towncar. However surely changing this would be killing the American dream?
A caveman dreams of being us, the incalculable power and riches. We dream of being Q, then what?
They were found guilty of breaking a federal law in court and that verdict was upheld on appeal. Why do you think they are in court now? To determine the penalty for breaking the law.
They were found guilty of breaking a federal law in court and that verdict was upheld on appeal. Why do you think they are in court now? To determine the penalty for breaking the law.
Uhhh... you are talking about the anti-trust case, whereas I and the rest of the people on this thread are talking about the SEC investigation.
"And like that
Oh contraire - "regulations" are in fact so close to law that mere mortals can't tell the difference.
;)
Who said I'm a mere mortal?
Regulations correctly issued by government agencies have "the force and effect of law" until overturned by a court of legislated out existence by Congress.
The SEC is a government body that REGULATES the exchange of stock. They can fine you or your company for breaking the SEC regulations. They can do things to your public stock. They can cause you or your company to be criminally investigated, but they themselves are not able to put people in jail.
From their site:
"While the SEC has civil enforcement authority only, it works closely with various criminal law enforcement agencies throughout the country to develop and bring criminal cases when the misconduct warrants more severe action. "
There are lots of people in jail today because they broke IRS "regulations".
Can you give me some examples of broken IRS regulations that landed people in jail? Not paying your taxes doesn't count -- you must pay federal income tax, that is a law, not a regulation. So hopefully you are talking about something else?
"And like that
"Moral - don't trust an analyst. Do your own research. And hope you don't get screwed anyway in the end."
A sincere question for you.
What if I don't have the five hours per day it will take to thoroughly understand the very complex financial system of stocks and bonds? What is I am unable to understand it even if I do have the time? It takes a lifetime of study to understand just bonds for example.
What is your advice to the average Joe on the street. It sounds like you are saying "stay out unless you understand fully" knowing full well that the average Joe can't ever understand and do their own research. Are we headed for a future in which the individual investor should stay out of the market altogether?
War is necrophilia.
In our country we almost never prosecute rich people let alone corporations.
War is necrophilia.
According to an article in the Economist from August 5, 1999 entitled " Share and share unalike."
Microsoft Financial Pyramid covers some of the issues up to Nov 1999. I can only assume that these practices have continued and that MS probably would tank if subjected to a proper audit. That's just the book keeping.Also keep in mind that not only are OpenSource/Free Software breathing down their neck with increasingly viable desktop alternatives, but Oracle, Sun, IBM as well. Plus an increasing number of governments, lately Peru, China and Germany, are getting tired of their busness practices.
Now think about the software situation. Linux, QNX and others have them beat in the embedded OS market. Windows as a server OS is beat by Solaris, Linux, *BSD. Windows as middleware is becoming decreasingly competetive with Gnome and KDE. Aqua has it beat hands down, you can even run legacy apps like Ms-Word, which is about the only thing currently holding GNU/Linux back from the general desktop. However, OpenOffice and others are filling the gaps left by Lotus-123, Borland's Quattro, WordPerfect.
Then there are indications that there is no improvment on the horizon. For example the shift from software, to marketing to legislation. The way MS is working the punishment phase of the antitrust trial it looks that their products are unable to compete in a free market. Even die-hard MS fans cannot refute EWeek's report that "[Allchin] later acknowledged that some Microsoft code was so flawed it could not be safely disclosed." Maybe coincidentally, Bill has been shifting investment money out of Microsoft. If the rest of the top execs are offloading also, (this is speculation and it would be nice to see some real figures, but where can that type of info be looked up) then it would indicate no confidence.
So with out a cash flow or at least investor confidence, all Microsoft's troubles would bite them hard. Death by a thousand small bites, plus a few medium sized ones. Perhaps the SEC backed off to avoid popping Microsoft's baloon like just another overratted dot-com.
Or would it turn out to be a collapse more like Enron's.
Beta is broken and the link to classic doesn't work. Stop wasting our time or there won't be anybody left here.
Can someone please tell me why this was moderated this way? It was meant in earnest... simply, Microsoft can't continue with their practices, just like Enron couldn't. Only it will take them longer to collapse.
libertarianswag.com
What is my advice - work with a financial planner.
Seems simple, yes? Consider this - when your health is at risk, most people go to a doctor. Why isn't your financial health just as important?
During most of the 90's, you could throw darts and make obscene returns. Welcome to the current market, where the market moves in odd ways. It's harder to invest successfully in this market.
I do not advocate that Joe Average stay out of the market. Approached intelligently, the stock market is an excellent way to develop a solid plan for the future - large purchases, kids, retirement, etc.
My investment tool of choice is not a stock, but a mutual fund. I research the various funds, including their long-term history, markets they invest in and the history of the mutual fund family (VERY important!). I also look at the managers of the mutual fund - are they new? Where did they come from, etc. Here is an excellent resource for that. There are other sites as well.
I really like the mutual fund as an investment tool. They are managed by professionals who are capable of performing the research needed, and can respond quickly to market movement. Mutual funds also help to spread some risk out by investing in a variety of companies. This doesn't always help if an entire sector collapses, but it can mitigate losses.
Another option is to get a good stockbroker who will recommend stocks to you. Even there, a good rule of thumb is to stick with stocks you know something about - even if you just know what the company does. You can get into trouble investing in companies you've never heard of. At the very least, know the companies industry and have a rough idea of how well that industry is doing.
The best thing Joe Average can do is invest now. Immediately. Even if it's just a bit - it adds up. Try this - take two people. Adam invests $2,000 a year for seven years. He spends the next 25 years or so spending that money. Bob does the opposite - spends 2K a year for seven years, then saves it for 25 years. Assume a 10% interest rate - see how much they each have at the end. Pretty interesting.
Investing is complicated - establish a good working relationship with a professional and let him help you. Find someone that YOU feel comfortable dealing with. Trust your gut. Make sure you understand what they are saying, make the broker explain things to you. Ask why he likes certain investments, and not others. Make him answer the tough questions - a good broker will take the time to explain things to you.
I'm biased, but you are in the St. Louis area - try this company. Yeah - it's my dad's firm - I'm biased, remember?
"But we decide which is right, and which is an illusion"