Slashdot Mirror
Microsoft Posts Record Earnings
sriram_2001 writes "Microsoft has just had a record quarter where their profits have doubled from the previous quarter. Total sales are at $10 billion, exceeding both internal and external expectations. Microsoft has attributed the rise in earnings to increased server sales (where *nix-based systems are supposed to be doing well) and more XBox units being sold. For a company that most Slashdotters would say is on the decline, Microsoft sure has weird financial results!" To put it in perspective, Microsoft's income is about the same as New York State receives in taxes - below California, and well above the other 48 states.
But how do we know that this growth isn't just because we happen to be in a fairly prosperous time for the tech-market in general right now? These rates could take a turn for the worse in the next couple years. So this could all just be circumstantial.
What I'd like to see is a comparison of growth rates of major software companies. Even if Microsoft still comes out on top, at least the comparison would be relative to _something_.
the day after MacWorld, Apple reported its best quarter ever.s .html/
http://www.apple.com/pr/library/2005/jan/12result
This isn't another episode of funny accounting is it?
It is of sorts. Microsoft has so much cash in various accounts is is commonly known in the past that not was all accounted for as to make their profits more reasonable. With a 80-90% markup in North American markets does not hurt either.
Y2K was 4-5 years ago, and alot of the sales are upgrades from NT to W2000 or W2003. 1999 was a bubble sales year and after 4-5 years write down many companies will upgrade servers. Sales for this type are Y2K cyclical and will not last.
And if you don't plow the income into R&D to fix issues of security, usability and reliability then it is like milking a cow without feeding it.
Novell had such a bubble near it's end at the top as did Digital and IBM before them. History is just repeating itself.
...that 1.5 billion of the increase in profit is due to a 1.5 billion reduction in R&D. Wonder what long term effect halving the R&D budget will have on future MS technology?
I used to temp for MS from 1998-2000, I was a bus rider and the traffic was so bad from Redmond to Seattle that some employees would cruise the bus stops asking for a third person to qualify for the car pool lane. If you didn't take the HOV lane, it would add 45 to 90 minutes to your commute.
One time I got a ride with someone from accounting. The conversation must have been started about how they posted record profits that day and he was all giddy about it. He went on about how they withhold money back in some financial quarts in order to show off record results in another. I'm sure this has become familiar with many people over the 90s that once or twice a year MS would post record profits. The sole purpose would be to drive up the price of the stock. I laughed and asked him if it were legal, he said that not only was it legal, but very common in the industry. What he was doing wasn't any different from what other companies did during the dot com explosion.
I haven't temped there in a while, im not sure how things are in the labs or meeting rooms. Everyone benefits from a higher stock price, but im thinking this may be to keep their talent from jumping ship. Back in the mid to late 90s, a program manger or developer could be expected to work there for 7 years, then cash in all their stock options and retire at the ripe old age of 30. Its obviously not like that now because the stock price is lower and has been like that for several years. Investors really aren't that worried about the stock price, they are in it for the long term investment. But not the workers! Oh no, they want to work that 7 years and get the hell out of dodge and its the stock options that really keeps a MS employee working there. I've heard it from a few developers that if it wasn't for the stock options, they would quit their jobs in a heartbeat.
From MS Versus:
"According to an ABC News 1/22/99 article by Michael Martinez, Microsoft's own internal auditor, a respected 30 year veteran and former partner of Deloitte and Touche, was fired in 1996 after informing management that their earnings manipulations were illegal and violations of the SEC and FASB laws. He was given the option to resign or be fired and later settled for $4 million after suing under the Federal Whistle Blowers Act."
"The single most lucrative product Microsoft sells is its own stock. Microsoft receives almost as much cash inflow from the stock market as it does by selling goods and services... Basically, Microsoft receives cash by issuing employee stock options, after which the company then receives billions of dollars in tax deductions from the IRS for doing so. Add in the warrants it sells on its own stock, and the company made over $5 billion off the stock market [for the] fiscal year end[ing] July 1999, tax-free. For comparison, its after-tax net income was only $7.8 billion. Microsoft may not be much in the programming department, but its accountants are impressive." (Landley, Rob. "Why Microsoft's Stock Options Scare Me." The Motley Fool 17 Feb 2000)
Developers: We can use your help.
Most console hardware is only a loss leader at launch - eventually, they will get cheaper to produce, as the price of components goes down. Look at the cost of processors - you can get a Pentium 3 800 Mhz at Fry's for what, $20, if even that now? Look at Hard Drive prices - can you even find an 8 GB Hard drive on a shelf? Even if you could, what would you pay for it?
And you have to figure that MS is buying bulk, and is getting an even cheaper price. So, yes, I would image right now XBox hardware sales are giving MS profit.
And as far as Halo 2 goes... even if it comes out for the PC, I won't be buying it. Nor will I buy Age of Empires 3. (No, I will not pirate them either - I'm just not interested in owning or playing any Microsoft product.)
Besides - Burnout 3 is also a helluva lot of fun on my PS2.
I have not looked at the 10Q yet. But right after I worked there, Microsoft started very agressive cost-cutting. Benefits, etc. Even my whole department was eventually moved to India. I seriously doubt that this is primarily due to increased sales (MS usually only has notably large increases with the release of products) but rather to these cost cutting measures.
Otherwise, it would seem like an artifact of accounting (revenue posted one quarter but not earned until this quarter, etc).
LedgerSMB: Open source Accounting/ERP
One thing that Microsoft has always done is keep their people feeling that Microsoft is the underdog and needs to keep fighting. They believe that all the money belongs to them by right and they are incredibly bugged by ANYONE else who makes money in their business area. They also feel that the next innovation could obsolete them and while this does not drive them to innovate, it does drive them to co-opt others' innovations quickly.