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Did Microsoft Alter Windows Sales Figures?
Saxophonist writes "InformationWeek claims to have analyzed Microsoft's most recent Form 10-Q and observed that a reported increase in earnings for the Windows unit may be due to accounting trickery rather than actual sales growth. Microsoft apparently increased its reported revenues for its Windows, Server & Tools, and Office units at least partly through shifting revenues from other units. While there may be nothing 'to suggest the company's revisions violate any accounting rules,' the actual growth in Windows sales was likely nowhere near the high double-digit percentage growth claimed. InformationWeek speculates that revenues from Xbox and Surface may have been among the revenues shifted to the other divisions."
Except of course that people are using these numbers to do something important.
And this isn't just an idle problem: There have been colleges, pension funds, charitable foundations, and retirees crippled financially for decades because they looked at companies like Enron which were generating good consistent returns and decided that it was a good investment. This stuff does real damage to people, and the SEC simply doesn't have the resources to stop it.
I am officially gone from
Interesting quote:
The spokesperson said some of the changes were the result of embedded systems products being moved from EDD to Server & Tools and Mac Office's move from EDD to the Business unit after Bach left.
For many years, Mac Office revenue was counted towards Entertainment and Device Division. I've always thought that was rather strange that it wasn't part of the Microsoft Business Division where it belonged. MS might have organized revenue based on the executive in charge which is normal. But also it could be that MS was trying to soften the massive losses of the Xbox first seven years.
Well, there's spam egg sausage and spam, that's not got much spam in it.
There isn't anything particularly brain twisting here, and I'm not sure what mistaken impression the revisions discussed in the article are supposed to create (before the revisions, the quarterly net income for the entire company is $5.4 billion on revenues of $16.2 billion, after the revisions it is exactly the same, most businesses would kill to be that profitable, and they would kill their mothers to have the 'billion' in those numbers).
Here's what you are missing: Everyone expects Microsoft to be highly profitable in their core business, and investors are used to the sad fact that Microsoft wastes a billion here and there on things like buying revenue for Ping. So if the losses in the online division grow, or XBox doesn't as well as expected, nobody cares much because the main business is safe as ever. All those losses in online can be stopped any second by just leaving that business area, if Microsoft wants, so it's nothing to worry about.
But if Microsoft makes less money in Windows, Office, or Server, or if it is found out that it props up its main business by moving money from other areas, that is a very, very bad sign and investors would be quite unhappy.
Your example is actually correct. Microsoft as a monopoly is restricted in what they are allowed to do much more so than a smaller company like Apple. It might not always make sense, but abuse of monopoly power is a very serious offence.
These days it might sound funny to talk about Microsoft as a 900-pound gorilla, but at one time they definitely were.
So the company lies/misstates/whatever to make the core businesses look better and prop up the stock.
And the, by some coincidence, monkey boy sells a billion or two of stock.
Move along. Nothing to see here.........