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."

Comments

Yes

[Anonymous Coward]

They're a Fortune 100 company. They did.

Re:Yes

[hsmith]

Well look at it this way - they aren't fudging their balance sheets as bad as the US Government

Re:Yes

[Low Ranked Craig]

there lying what?

Re:Yes

[peragrin]

The US government is better than NY state government. NY state budgeted 12 million dollars over 3 years for a new type of drivers license. They received 3 million over 2+ years.

That is the real problem with government accounting. They don't know how much money they really are working with only what they think they might be estimating they have.

When those estimates are wildly off based off of bad methods of statistics deficits sore.

Re:Yes

[AusIV]

How is this different from corporate accounting? Most businesses budget for the long term based on projected earnings. If those earnings don't come through for whatever reason, they end up with budget deficits.

Re:Yes

[Anarke_Incarnate]

Their: Denotes ownership
This is correct in the first sentence.

They're: "They Are"
This is what you should have used in the second sentence.

Re:Yes

[HermMunster]

Microsoft wants to make their company seem like it is more profitable so that their share values go up, shareholder confidence returns, and they give the people the impression that they are still on top making the best product. Apple's been killing them in the area of revenue yet Microsoft had been ahead in profit. Now Apple has that crown too--even with obvious overhead of paying for the bill of materials (BOM). Microsoft seems to have problems coming up with new ideas and technology. Everyone knows they are basically stuck with Windows and Office, and that that'll last only so long.

So, people distrust them and they have an issue with demonstrating they are still on top (which they are, just not the very top any longer). So, they cook the books to make it seem like they are doing better than they are with their new product.

Does anyone here have any knowledge of products that Microsoft is developing that will satisfy the masses addiction to technology? Don't say WinMo7 because that's pretty much going to flop in my opinion. Anything else? I don't think they can sustain following up on other's products. They need something new and unique to them. A new radical version of Windows isn't it either. They are basically loosing on the embedded front, they are loosing on the smart phone market, they are loosing the tablet wars (which I don't think they can bring themselves out of).

Re:Yes

[peragrin]

True but most corporations budget based on conservative estimates. The government predicts based off everyone paying exactly what they owe in taxes without deductions. Also a company can go bankrupt. a Country can also go bankrupt but it is very very messy.

Re:Yes

[BronsCon]

"oh wait their lying in they're motto too."

That doesn't seem right...

Re:Yes

[camperslo]

Well look at it this way - they aren't fudging their balance sheets as bad as the US Government

Shouldn't they have to count the government as a subsidiary?

Re:Yes

[DaveGod]

Actually, they didn't. Even a basic check, like reading the press release, tells you what they did.

Infoweek made at best a gaffe. They took the figures for the 3 months ended 30 Sept 2009 originally stated and compared them to the 30 Sept 2010 figures recently released, even though right beside those 2010 figures are the 30 Sept 2009 figures updated to reflect the new accounting policy.

Calculating using the figures sitting side-by-side, this change in policy does not distort growth. This what accounting rules require (at least under IFRS, I can't imagine US GAAP does differently), and why. MS also used the revised policy in the %'s given in the press release, so they are both under the same policies. Nowhere in the PR does MS refer to the faulty figures Infoweek is complaining about. Infoweek's article is all about them realising that they were using the wrong figures but not realising that it was due to their own mistake.

For Infoweek to compare against the wrong figures they had to ignore the comparatives given right there in a spreadsheet file given by MS and instead go find an old file, and ignore the prominent disclosure given to the change in the press release that provides the link to the filing:

In addition, we have recast certain prior period amounts within our Form 10-Q that conforms to the way we internally managed and monitored segment performance during the current fiscal year.

As for the deferral of income from Vista sales with W7 upgrade packs, that follows accounting rules too (well, assuming they calculated it properly). Regardless, the entire second paragraph is dedicated to explaining the impact of the accounting rule and even removing it to show the underlying performance:

Prior year results reflect the deferral of $1.47 billion of revenue, an impact of $0.12 of diluted earnings per share, relating to the Windows 7 Upgrade Option program and sales of Windows 7 to OEMs and retailers before general availability in October 2009. Without the deferral in the prior year, first-quarter growth rates for revenue and operating income were 13% and 20%, and growth in net income and earnings per share were 16% and 19%, respectively.

Oh and there's reconciliations and everything in the accompanying slides. Infoweek's "exclusive" refers to their mistake regarding policy changes that were very prominently disclosed.

I know MS isn't exactly celebrated around here, but posting this kind of thing detracts considerably from the credibility of the more valid criticisms.

Re:Yes

[AHuxley]

They don't know how much money they really are working with only what they think they might be estimating they have.
They do via the http://en.wikipedia.org/wiki/Comprehensive_annual_financial_report
Deficits "sore" in the short term public view to keep the public spooked and scared.
As for MS they have always played loss leader as they embrace and extend their way into new markets.
The problem for MS has always been one of image. Wealth creation at a personal level for its staff that is ever expanding.
The reality of been rich short term is starting to show. Wealth creation in some divisions might be over.

Re:Yes

[rtb61]

Will it is different if the company is a public company and it's share value is based upon it's perceived future income. Falsely misrepresenting the sales value of their leading products in order to promote the future value of the company is more than just bending SEC rules.

Especially when the CEO simultaneously sells more than a billion dollars worth of shares, now that is called insider trading because the CEO had access to information that the rest of the public was not aware of and especially when that information what have a marked impact upon the value of the companies shares.

Re:Yes

[Shadow of Eternity]

Or they blame the difference on piracy and just start suing people.

SOP?

[Nidi62]

I thought pretty much every publicly traded company did stuff like this?

Re:SOP?

[BSAtHome]

Wasn't it called "Lies; Damn Lies; and Corporate Accounting"?

Re:SOP?

[Chrisq]

I thought pretty much every publicly traded company did stuff like this?

Not just publically traded. I worked by a privatley owned company where basically each departments end of year bonus was decided by a bunfight to decide which department was responsible for how much revenue and at what cost. The only fixed thing was the company total, they shuffled things between departments and divisions at will.

Re:SOP?

[Black.Shuck]

decided by a bunfight

If only *all* things in life could be decided by a bunfight.

*sigh*

Re:SOP?

[elrous0]

Yeah, but this is Microsoft, and this is /. So that makes anything they do automatically exceptionally bad.

For example, when Apple bundles its browser with its OS--that's just to benefit the consumer experience. When MS bundles its browser with its OS--that's evil, anti-competitive, and a criminal offense.

Re:SOP?

[Low Ranked Craig]

You have no idea what the antitrust suit was all about, do you? Here's a hint - Microsoft still bundles IE with Windows...

Re:SOP?

[Eponymous Coward]

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.

Re:SOP?

[mcgrew]

Failure, my ass. Shooting yourself in the foot ON PURPOSE is not failure. They hit their taget, didn't they? That's not failure.

Re:SOP?

[BrokenHalo]

And OS X still comes bundled with Safari. I haven't tried this for a couple of years (at least), but last time I checked, deleting Safari caused a number of apparently unrelated things to break.

Of course, neither OS stops you using another browser as the default.

Re:SOP?

[dbIII]

It's rumoured that Rupert Murdoch's Newscorp was like that for years with a flow of money from one company to another to give the illusion that the entire thing was above water and that he could afford to buy things like Fox.

Re:SOP?

[Higaran]

Dude, this isn't the 90's anymore, Apple is the monolopy, now.

Re:SOP?

[Eponymous Coward]

In what do they have a monopoly? About the only think I can think of is in stand-alone MP3 players and even that is debatable.

Re:SOP?

[bennomatic]

I don't remember where I read it, but some pundit blogger recently wrote something like, "Not too long ago, it would have been unimaginable that Apple would be the monopolist, Google the evil betrayer of privacy and Microsoft the underdog." I know I'm misquoting, but you get the gist. It's amazing how much things change in a relatively short amount of time.

Re:SOP?

[icebraining]

They have a monopoly over their own products, duh!

(note: this is intended to be a joke, mods)

Re:SOP?

[Locke2005]

In bunfights, there are no losers, only weiners.

Re:SOP?

[Higaran]

http://www.fiercemobilecontent.com/story/itunes-now-70-digital-music-sales-amazon-growing/2010-05-27 I know this is kind of an old link but 70% of the market qualifies as monolopy. Plus the fact that they are about 30% of all music sold in the us every month. They are even under a DOJ invistigation. http://topnews.us/content/221070-apple-under-doj-investigation also kind of an old link. Then they are trying to dictate other stuff, like the whole thing with flash. IMHO if the DOJ is investigationg you for anti-trust laws, then your pretty much a monolopy or on the verge of becomeing one.

Re:SOP?

[elrous0]

Yeah, and the EU is still harassing them about it to this day. Here's a hint - the EU doesn't require Apple to have a ballot for *it's* browser, only MS.

Re:SOP?

[Eponymous Coward]

Ah, music. I was only looking for monopolies in markets where they actually make the product. Never thought of their music channel. Good example.

Re:SOP?

[UnknowingFool]

http://www.fiercemobilecontent.com/story/itunes-now-70-digital-music-sales-amazon-growing/2010-05-27 I know this is kind of an old link but 70% of the market qualifies as monolopy. Plus the fact that they are about 30% of all music sold in the us every month.

Monopoly does not mean highest marketshare. Marketshare is only one test of monopoly power. One of the other tests of monopoly power is whether you can get suitable alternatives. Another test is barrier to entry.

In the case of music, iTunes is not the only source of music. You can buy music by buying CDs through brick and mortar as well as online sales. Even if you limit the market to online music, you can get music through iTunes, Amazon, Zune Marketplace, etc. The only limitation is that you have to get music in a compatible format with your player. Since AAC or MP3 can be played by many players (and isn't controlled by Apple) there are alternatives.

Secondly, if you didn't have alternatives to iTunes could any company launch an alternative without significant barrier to entry. Both Amazon and MS did after iTunes was launched. The real barriers to entry are approval of the RIAA companies which is not within Apple's control and money to build your web store.

They are even under a DOJ invistigation. http://topnews.us/content/221070-apple-under-doj-investigation also kind of an old link.

From what I know about the situation, Apple did not like it when they heard that Amazon was going to get exclusive content from the record companies.

Stone cited "people briefed on the inquires," who said investigators have been particularly interested in allegations that Apple used its market power to seek to prevent the labels from participating in exclusive music distribution deals with rival Amazon.

My reading of that is Apple was trying to prevent exclusivity. They did not prevent Amazon from getting content but rather exclusivity of the content. Slight difference.

Then they are trying to dictate other stuff, like the whole thing with flash. IMHO if the DOJ is investigationg you for anti-trust laws, then your pretty much a monolopy or on the verge of becomeing one.

There's a difference between what Apple has done with Flash and what MS did (which is the counterpoint). Apple has dictated that their own players will not use Flash. Apple has not dictated what Android or MS does with Flash. MS told Intel not develop a Java VM or MS would "favor" AMD in their next version of Windows.

Also investigation != conviction. Not every investigation leads to charges or conviction. Sometimes the investigation is settled or even dropped.

Re:SOP?

[camperslo]

It's ironic that so many that don't like Fox or Newcorp pumped so much money into the organization by paying to see Avatar.

http://www.theaustralian.com.au/business/avatar-leads-news-corp-to-us25bn-profit/story-fn65t1pq-1225901426210

That in mind, there's a bit of irony running into conservatives complaining that Avatar had a liberal agenda.

I guess it is also ironic to see those that like Newscorp and dislike MS-NBC liking Microsoft.

Maybe it's time for Microsoft to produce a movie, but what? I doubt they'd go for a remake of Antitrust.

http://www.linux.com/archive/feed/6854

Re:SOP?

[aaronfaby]

> I know this is kind of an old link but 70% of the market qualifies as monopoly.

Based on what? At what percentage of the market is a company considered a monopoly?

Re:SOP?

[sharkey]

What kind of pr0n are we talking about again?

Re:SOP?

[HermMunster]

Microsoft was ruled by the courts as a predatory monopolist. They were then convicted of operating criminally as a monopoly. At that time you could buy other computers, you could purchase motherboards and components and build your own. You could choose Apple's products as an alternative to Windows. You could buy your software from tons of other sources and you could develop software with other company's tools.

Yet, though you could do all these things they were ruled a monopoly where they acted in a predatory manner, and were finally convicted of that in a court of law.

Re:SOP?

[UnknowingFool]

Microsoft was ruled by the courts as a predatory monopolist. They were then convicted of operating criminally as a monopoly.

No, MS was convicted of abusing monopoly power. It is not illegal per se to have a monopoly in some cases. Before a company can be convicted of abusing "monopoly" power, that company must first be considered a monopoly. To be considered a monopoly, a company must have more than just high market share. See monopoly. Namely "No substitute goods" and "Capital requirements".

At that time you could buy other computers, you could purchase motherboards and components and build your own.

None of which MS made so that point is irrelevant. The market which MS has monopoly power was in operating systems, namely on 386 computers.

You could choose Apple's products as an alternative to Windows. You could buy your software from tons of other sources and you could develop software with other company's tools.

Again, the market was defined by the court to be operating systems on 386 computers so that made Apple irrelevant. At the time Linux was still in its infancy so it was not a suitable alternative.

Re:SOP?

[hitmark]

Corporations don't care about liberal or conservative, all they care about is the flow of capital into their shareholder accounts.

It will not surprise me that one see corporate divisions or subsidiaries have a liberal or conservative angle depending on what market they are aiming for.

Re:SOP?

[HermMunster]

No, Microsoft was convicted of using their monopoly in a predatory manner. They were convicted of criminal monopolistic practices. Making them a convicted predatory monopolist.

the truth!

[cindyann]

Since I'm a shareholder -- by virtue of mutual fund shares in my 401k and IRA accounts -- I want to know the truth.

Re:the truth!

[Ben4jammin]

Yea well good luck with that

Re:the truth!

[AdmiralXyz]

But see, that's the beauty of corporate accounting. They never actually lie, it's all a matter of classifying revenue sources and sinks in brain-twisting ways that are technically accurate, even though from a bird's-eye view they give a completely mistaken impression of what's going on.

And this isn't consigned to Microsoft, like an above commenter said, every Fortune 500 company has done it to varying extents. It's difficult to make illegal, too, because there's no one technique used (seems to be as much an art as it is a science, finding loopholes that aren't closed); so it's impossible to write a law that's general enough to stop the practice yet still enforceable.

Re:the truth!

[mspohr]

Accountants are good at this. When I had a (small, privately owned) company, my accountant used to ask me "What number do you want it to be?"

Re:the truth!

[maxume]

The Information Week story is quoting from an SEC filing that Microsoft made. A filing Microsoft knows is public. So Information Week didn't exactly bust anything open here, and you just have to decide if you care about Microsoft's results on a segment by segment basis, or if you are happy owning the company in general.

Re:the truth!

[maxume]

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).

I suppose it could all be a giant ploy to grossly overstate the increases in Windows sales, but I'm not sure how interesting that is from the perspective of an investor (and the 10-k is certainly written with investors in mind).

Re:the truth!

[UnknowingFool]

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.

Re:the truth!

[mcgrew]

To misquote Jck Nicholson from A Few Good Men, "You're a shareholder. You can't handle the truth!"

Re:the truth!

[gnasher719]

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.

Re:the truth!

[rmcd]

Obvious retort: You can't handle the truth.

This brilliant parody has been floating around for quite a while, author unknown (I found it at http://www.trinity.edu/rjensen/fraudenron.htm )

        A take-off from the movies "A Few Good Men" (Some phrases are in the original script and some are altered.)

        Tom Cruise: "Did you order the shredding?"

        Jack Nicholson: "You want answers?"

        Tom Cruise: "I think I'm entitled."

        Jack Nicholson: "You want answers!!"

        Tom Cruise: "I want the truth!"

        Jack Nicholson: "You can't handle the truth!"

        Jack Nicholson: "Son, we live in a world that has financial statements. And those financial statements have to be audited by men with calculators. Who's gonna do it? You? You, Dept. of Justice? I have a greater responsibility than you can possibly fathom. You weep for Enron and you curse Andersen. You have that luxury. You have the luxury of not knowing what I know: that Enron's death, while tragic, probably saved investors. And my existence, while grotesque and incomprehensible to you, saves investors. You don't want the truth. Because deep down, in places you don't talk about at parties, you want me on that audit. You need me on that audit! We use words like materiality, risk-based, special purpose entity...we use these words as the backbone to a life spent auditing something. You use 'em as a punchline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very assurance I provide, then questions the manner in which I provide it. I'd prefer you just said thank you and went on your way. Otherwise, I suggest you pick up a pencil and start ticking. Either way, I don't give a damn what you think you're entitled to!!"

        Tom Cruise: "Did you order the shredding???"

        Jack Nicholson: "You're damn right I did!"

Re:the truth!

[h00manist]

But see, that's the beauty of corporate accounting. They never actually lie,.

Enron was the master of it. Every company does it. Capitalists are out to kill capitalism. In my view, they will succeed.

Re:the truth!

[mark72005]

What Enron was doing was actually lying in the legal sense. Not quite the same thing.

Re:the truth!

[Mr. Munshun]

The truth? You can't handle the truth! http://www.youtube.com/watch?v=5j2F4VcBmeo

Re:the truth!

[UnknowingFool]

It is a sad state of investing that investors like companies that are growing or expanding. In decades past, it was enough that a company was profitable and stable. But back then most companies offered dividends with shares. More companies are going away from dividends and thus there is not a lot of interest by investors to be concerned with stability. They want growth.

If MS cut all the unprofitable products, then that would show then as not growing or expanding in anything other than Office and Windows. Even though MS offers dividends, their stock price has been fairly stagnant in the past decade. That would drive more investors away.

Re:the truth!

[maxume]

The "propping up" being discussed here is ~10% of revenues. And they can't really do it with fake sales (so they really can't reclassify a bunch of new revenues each year, the smaller divisions are too small to keep doing that). And they revised the previous numbers when making the comparisons, so the actual growth reported in the new filings is the actual growth of the newly organized division, not a trick (and it is clear that Windows continues to have pretty huge sales numbers).

So are they messing around with their accounting? Sure. But the case for them doing it to mislead investors (rather than, say, for internal organizational purpose) is pretty thin.

Re:the truth!

[FriendlyPrimate]

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.

Hrm....maybe all those unprofitable divisions aren't so unprofitable after all?

Re:the truth!

[phantomfive]

Not really, but if Microsoft wants to keep investors around without growing, they need to pay a higher dividend. The only reason to invest in a company that doesn't grow is for dividends. Apple can get away with paying 0 dividends because it has massive growth. If they stop growing, it will be fine, but they'll need to start paying dividends, otherwise their stock is worthless.

Re:the truth!

[Taxman415a]

It is a sad state of investing that investors like companies that are growing or expanding.

It's not a sad state at all. In fact, it's based on extremely basic finance math. If a company isn't growing, and is paying the same dividend, the value of your investment stays the same and your investment does not grow in value. If that dividend yield is low as most are, you would be better served choosing another investment. The only way to make money on an investment [the typical long position at least] is for it to appreciate in value or for it to pay a high enough income. Since most companies are choosing not to pay much in dividends, the only other option to make money is to buy growing companies. A growing company means growing future value and an investment that grows in value.

Re:the truth!

[slick7]

Since I'm a shareholder -- by virtue of mutual fund shares in my 401k and IRA accounts -- I want to know the truth.

Just think about it.Vapor ware => Vapor sales, ergo, 401k and IRA => Vapor.

Re:the truth!

[Red Flayer]

It is a sad state of investing that investors like companies that are growing or expanding. In decades past, it was enough that a company was profitable and stable. But back then most companies offered dividends with shares. More companies are going away from dividends and thus there is not a lot of interest by investors to be concerned with stability. They want growth.

Microsoft's dividends are dwarfed by the amount they've spent on buying back shares. This is one way that MS keeps it's stock price steady, and their willingness to do so is one reason why their stock is consistently rated as 'hold' at worst. Last year (or the year before?) MS actually issued $5 billion in bonds in order to fund stock buyback while maintaining cash reserves for acquisitions, dividends, etc.

Re:the truth!

[Kaenneth]

I think it's more like if that hardware isn't a standard X86 box running Windows, shove it to the guys that deal with weird hardware; like the talking barneys, brown music players, and Macs.

Anyway, XBox runs some form of the Windows API, and Surafce runs on Vista; so I'm sure if they were third party companies they would be buying Windows licences... so why account for it as 'free' to the Windows division?

Re:the truth!

[Will.Woodhull]

Actually it goes a lot further than Fortune 500 companies. It is all USA companies, large or small.

Anyone who has been successful in running their own business can tell you that the Federal Income Tax law is written in such a way that it pretty much requires a business to use accounting procedures that are not intuitively obvious to the outsider. If you don't do so, you will not be in business for very long.

Consider that a common way for a USA start-up to fail is to show too much profit too early in the game-- and get trounced by competitors who are not making as much profit and so have a much lower tax expense and can undercut your prices. The first thing a USA start up company should do, even before making their first sale, is to find a good business tax consultant and follow his advice on how to set up the books and how to conduct business to maximize legitimate expenses and minimize the profits that will be taxed.

Desperate CEO?

[BoRegardless]

When a company suddenly starts moving the numbers around from one box to another, the question is always why? Could it be that the pressures from the BOD is getting tougher on people at the top?

Re:Desperate CEO?

[Locutus]

they have probably been doing this for years so I don't think it shows anything about the CEO's mental condition. If I recall correctly, one time they cut their R&D by 50%(something around $3billion) and amazingly almost every division turned in either a small profit or far less than the typical $250 million in losses they usually show. The following year they were all back to their usual hundreds of millions in losses.

I just don't think this is new for them, just easier to notice.

LoB

Re:Desperate CEO?

[Nethemas the Great]

Yet people still didn't figure there was anything interesting about Ballmer selling off $1.3B worth of MS stock with plans for a total $2B. I'm telling you, there's more to it than tax prep. You don't after something like 6 years make your first sell off of MS stock in excess of 1/8 of your total holdings for tax reasons. There's some trouble going on and they're having a hard time digging themselves out. Win Vista was the first real sign, now we're seeing even more. There was a bit too much complacency while various trends were progressing all around them. Now there's some serious catch up to do and they don't seem to be doing it very well. Kin, Windows Phone 7, Azure, now evidently Windows 7/Server 2008. I think we'll see some rather interesting goings on in the coming year or two with Microsoft.

Re:Desperate CEO?

[Locke2005]

does that mean Apple is going BK soon? No, Apple prefers much more trendy restaurants. Going to Burger King is considered gauche and passe!

Re:Desperate CEO?

[hitmark]

Well i recall reading how Microsoft in Europe would write sales to their division in Ireland independent of the actual nation the sale happened. This to get the most favorable taxes.

Shuffling deck chairs on the Titanic?

[vlm]

Not as hideously corrupt or confusing as you might imagine:

The spokesperson said some of the changes were the result of embedded systems products being moved from EDD to Server & Tools

Isn't it all basically shuffling deck chairs on the Titanic anyway?

Re:Shuffling deck chairs on the Titanic?

[gman003]

I'm hoping it's shuffling deck chairs on the Hindenberg - it will be more fun to watch.

Re:Shuffling deck chairs on the Titanic?

[Toe, The]

I think it's turning out more like shuffling governors in the Ottoman or British Empires. A slow, gradual, slightly-pathetic decline as one setback overshadows another.

Re:Shuffling deck chairs on the Titanic?

[vlm]

Other than windows and office, the rest of the company is about as profitable as any other stereotypical .com.

Moving embedded systems from one data table to another is irrelevant, its not like they'll ever make money.

Standard slashdot car analogy: doesn't matter if I categorize my latest car repair tools purchase under "hobby expense" or "automotive:maintenance" or "medical:mental health/stress reduction" its still crapping out the same amount of cash.

Re:Shuffling deck chairs on the Titanic?

[LWATCDR]

umm.. I doubt that Hindenburg had deck chairs.
It's shuffling deck chairs on the Titanic.

Thank you from the literal net.

Re:Shuffling deck chairs on the Titanic?

[idontgno]

I am quite sure Hindenburg had deck chairs. She had decks. She had chairs, and unless they were also inflated with hydrogen or bolted to walls they were clearly resting on the decks.

Deck chairs. QED.

"You're welcome" from the hyper-literal net.

Re:Shuffling deck chairs on the Titanic?

[bennomatic]

Something about this imagery makes me LOL. Of course, I think of an ottoman going with my couch, not with a deck chair.

Re:Shuffling deck chairs on the Titanic?

[LWATCDR]

But the amount of time that the disaster took was so short that one didn't have time to do much shuffling at all. Also deck chairs are specific type of chair typically found on a ship and not just a generic chair on a deck. So it is still a broken metaphor please correct and use Titanic.

Company released sales figures

[falldeaf]

I always mentally put these parts of the slashdot poll disclaimer in front of sales figures released by *any* company: "This whole thing is wildly innacurate ... If you're using these numbers to do anything important, you're insane."

Re:Company released sales figures

[ByOhTek]

maybe, but how many companies have "Cowboy Neil" in their sales figures?

Re:Company released sales figures

[dkleinsc]

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.

Re:Company released sales figures

[FriendlyPrimate]

And when the company does finally collapse, the people who were responsible for the creative accounting are long gone doing the same thing to another company.

I tend to believe in the power of capitalism. But what I've seen lately is not just capitalism...it's pure greed. It's an economy run by narcissists who care of nothing else but their own personal pocketbooks. The company, the workers, the investors....it means nothing to them other than a means to an end. And we worship these people. And on the flip side, the people who actually produce the wealth in this country get castigated for being greedy because they want above-poverty-level wages.

Re:Company released sales figures

[abigsmurf]

These charitable trusts and funds would be just as hurt from investors panicking because what are actually pretty good figures for a company are buried by "FLAGSHIP PRODUCT MAKES MASSIVE LOSS. IS GLOBOCOM DOOMED?" headlines.

Re:Company released sales figures

[frank_adrian314159]

... the SEC simply doesn't have the resources to stop it.

Well, we can't have that ol' debbil "Big Gov'ment" steppin' all over the mystical, all-knowing, self-correcting, super-duper Free Market, now can we?

Re:Company released sales figures

[Locke2005]

how many companies have "Cowboy Neal" in their sales figures? Several, but they are all fast food franchises.

Re:Company released sales figures

[cbhacking]

Enron is a completely different case. They were actually lying about their financial status. MS did in fact earn as much money as their reports say, and did have as many expenses. They just decided that, for reporting purposes, it looks better if they attribute a greater share of that profit to sales of Windows and Office rather than sales of Xboxes. Nobody is going to suddenly discover that MS is actually bankrupt and has been lying in their statements; at worst they might learn, in surprise, that enterntainment devices have become bigger business that previously expected.

Re:Company released sales figures

[hitmark]

ding ding ding, have a courtesy copy of Das Kapital.

Re:Company released sales figures

[Anonymous Coward]

Yeah, that's how capitalism works. It's all about greed; if people can live without being greedy, then it's not capitalism. Supposedly that greed is what provides the incentive to serve society, as opposed to communism where we rely on automatic intrinsic motivation (e.g. you write software for the community because you like programming or want something to work instead of for money). The problem people fail to realize is that when someone is that self-serving and greedy, like they're supposed to be, they're going to pull these kinds of stunts instead of providing any kind of benefit to society as if there were some kind of competitive free market race.

Accoutant Interview:

[AnonymousClown]

A manager was interviewing accountants for a job. The first accountant came in and the boss asked, "What's 2+2?"

The first guy says, "4".

The mgr thanked him for his time and dismissed him because he was too honest. Then he called the second guy in. "What's 2+2?", he asked again.

"5" was the response.

He was thanked and rejected because he was incompetent, The manager then asked the third accountant in. "What's 2+2?"

The third accountant answered, "What do you want it to be?"

He was hired on the spot.

Re:Accoutant Interview:

[arivanov]

You are not quoting it right.

First of all, it is not an accountant interview, it is the interview for the Chief Economist of Romanian Socialist Republic.

Q: How much is 2+2.

A: That depends, if you have to give - 3, if you have to take - 5.

And he was not hired on the spot. The person to be hired was the nephew of Tovarish Cheushesku.

Re:Accoutant Interview:

[O('_')O_Bush]

Because you posted as a coward, you'll never hear me calling you a moron, but that is what you are. The post you are responding to is not a correction, but another joke altogether.

Who Cares...

[thewebsiteisdown]

Seriously? Unless Microsoft is cooking the books, who gives a rats ass how they account for the gajillion dollar revenue. If this is how FOSS scores points, by proclaiming "Ah HA!!!, they tried to trick us! The only sold 40 Million licenses of whatever, not 60 Million!. We... ummm, win?" This article is douchebaggery.

Re:Who Cares...

[mcgrew]

Unless Microsoft is cooking the books, who gives a rats ass how they account for the gajillion dollar revenue.

How come whenever anybody posts something about Linux, MS fans come up with "but look at market share!"

Why should I give a rat's ass about any company's market share? I don't care about MS's market share OR revenue, but I'd bet money a shareholder of MS or Red Hat would.

This is old news. "Microsoft lied again". I say "so what". Business as usual.

Re:Who Cares...

[flimflammer]

How come whenever anybody posts something about Linux, MS fans come up with "but look at market share!"

...What?

Is any huge corporation completely honest?

[digitaldc]

Actual sales versus paper sales...Microsoft is a huge profitable corporation so WHO CARES?

Is CmdrTaco a Pedophile?

[TheRaven64]

Am I the only person who hates these allegation-disguised-as-a-question headlines? Please can we stop posting them? If you're going to make an allegation, make an allegation, don't try to pretend that you're asking the audience for their opinions. If you can't back them up, don't make the allegations, and if you can then don't hide behind weasel words in the headline.

Re:Is CmdrTaco a Pedophile?

[SiChemist]

The story headline was "Exclusive: Microsoft Altered Windows Sales Numbers". I take the slashdot headline as questioning whether the story is completely accurate. Your beef appears to be with the story headline.

Re:Is CmdrTaco a Pedophile?

[thewebsiteisdown]

I second that. For fucks sake, the is /., do we need another excuse to tsk-tsk Microsoft? Now we know the truth of the thing, the closely guarded secret that they would have killed to protect.... the fact their accountants are bad people too! Intrigue! Drama! Petty! Self Serving!

Re:Is CmdrTaco a Pedophile?

[Anonymous Coward]

If you're going to make an allegation, make an allegation,

I allege that you are a man who wears women's undergarments.

Re:Is CmdrTaco a Pedophile?

[rrohbeck]

Very simple: If a headline screams "X?", the article will say "!X". If it was any different, the headline would scream "X!!!"
That's great because it saves you the time to actually read the article.

The Surface has revenue to shuffle?

[sarkeizen]

Or is that just to say that the XBox has been hiding it's losses for a while now.

Re:The Surface has revenue to shuffle?

[UnknowingFool]

Investors expect Xbox to lose money; they're used to it. If Windows starts losing money they'll freak the hell out.

Investors expect Xbox to lose money initially. They expect any product to become profitable eventually. Seven years of losses is a bit too much for investors to take, and it hasn't quite broken even yet even though the Mac Office was being used to soften the losses. As an investor, I'd want to know when the product will be profitable overall. Also what the heck happened to the mobile unit? The Kin was a disaster and WP7, while it looks good, will be operating at a loss while it launches.

Re:The Surface has revenue to shuffle?

[UnknowingFool]

How does WP7 look good? Besides the huge amount that Microsoft has dumped in marketing it really is a half baked OS at launch.

I mean it wasn't a buggy, half complete mess of a product that some of their products have been. For example the Kin. It was a "social" phone without many social features. It crashed a lot. The advertised features didn't work right. While the WP7 lacks the maturity of the iPhone, Android, even WebOS, it is at least usable. Many of their version 1.0 products can't say the same. It will take time for WP7 to catch up, but it's a decent start.

Re:The Surface has revenue to shuffle?

[lanswitch]

WP7 is version 7, not version 1. It's unfair to compare a 7.0 release to the 1.0 releases of other companies. But, in this case, if one would compare a WP7 phone with an iPhone 1.0, WP7 loses.

Re:The Surface has revenue to shuffle?

[LWATCDR]

I don't understand how it isn't half complete. No cut and paste, no multitasking, and no custom ring tones?
That seems half complete to me.
And it isn't version 1.0 it is Version 7! The last version of Windows Mobile was I think 6.5. Where do you think the 7 came from?
Besides trying to hitch hike on Windows 7 not sucking. Windows Phone 7 still uses the CE kernel. So nope it is not a 1.0 release it is a 7.0 release.

Re:The Surface has revenue to shuffle?

[UnknowingFool]

I don't understand how it isn't half complete. No cut and paste, no multitasking, and no custom ring tones? That seems half complete to me.

Your definition is it didn't have the features you wanted. My definition of half complete is missing or buggy advertised functionality. Like the Kin has Facebook "integration" but no events among other things. No calendar app in a phone despite it being a "social" phone. It has Twitter but you can't retweet? It would like a digital music player not being able to play MP3s like Sony tried to pull off with their first Network Walkmans.

Re:The Surface has revenue to shuffle?

[LWATCDR]

Or features that every other current smart phone on the market has?
Lets take a look at this feature by feature.
Multitasking.
Android yes
WebOS yes
Symbian S60 yes.
IOS 4 yes "limited"

Cut and paste.
Android yes.
WebOS yes.
IOS yes.
Symbian I don't know to be honest I would guess yes.

Custom ring tones?
Just about every phone on the market.
I would say that it is half baked and frankly since Windows Mobile 6.5 and early had cut n paste and multitasking it is just too odd for words.

Re:The Surface has revenue to shuffle?

[UnknowingFool]

I agree with you that WP7 is missing many features that other smart phones have. My point was WP7 is a usable product from MS which isn't normal for them. Will some consumers want the missing features, yes? But they can actually use the product as it was intended. Normally their products are barely usable like the Kin, Vista, and WM6. WM6.5 was barely usable for me. It kept crashing for no reason and it was a pain to do anything with it. I'm glad I didn't have to pay any money for it because it was a company phone.

Re:The Surface has revenue to shuffle?

[Missing.Matter]

What? iPhone 1 had no cut and paste and no multitasking as well, but it also had no apps, no MMS, no 3G, and initially cost $500-$600, later cut down to a still ridiculous $300-$400.

Windows Phone 7 at least comes in a variety of form factors from a variety of manufacturers on a variety of carriers, and the list will continue to expand, so there is more choice than with iPhone. While it doesn't have as many apps, the list is growing, and the ones I've used so far have been of high quality. For me, the benefits of the Windows Phone 7 over the competition are Office Integration, Xbox integration, Zune pass, Zune software (I despise iTunes, and find the Zune software a joy to use), wireless sync, the integrated Bing search (I know the reputation Bing has around here, but Bing maps is awesome. Don't knock it until you've tried it), and the hardware choices (you can't buy an iPhone with OLED display and slide out keyboard).

If you asked me to trade these plusses for cut and paste and ringtones, at this point I would not. They are such minor issues, and honestly they will be added soon enough. I think the earliest I heard for cut and paste was after Christmas. For now, it seems people want to make a big deal out of it because they have a vested interest in other platforms, not that it's actually deterring them from WP7.

Re:The Surface has revenue to shuffle?

[Missing.Matter]

Right, because cut and paste, multitasking, and ringtones account for 50% of the entire functionality of a phone.

I'm sorry, but if the difference between the OS as it stands and an OS that you will use is cut and paste and ringtones, then I don't think you had any intention of a fair review. You seem to start from the premise "Windows Phone 7 is terrible" and then find evidence to support your claim, then make that a benchmark for success.

Re:The Surface has revenue to shuffle?

[LWATCDR]

I wasn't offering a review at all. I have never used it so I can not review.
And if you read my first comment you would see that I did say that I felt Microsoft was pushing WP7s big strength which is Zune Pass if you are a music lover.
It's other big features I do have to wonder about.
Office on a phone? I can honestly say that I can not see a reason for that on a phone. A tablet or netbook yes but not on a phone.
Sharepoint? Don't use it at my office.
Exchange. Blackberry has that down pat but again we do not use it at my office so again maybe.
To me the lack of multitasking sucks. Sorry but that to me kills it. I do not have an Iphone for that reason. I hear the new limited multitasking on IOS 4 really helps a lot.
What you have to look at is not how much better WP7 is than Windows Mobile.
Is it better then IOS4, Android, and even WebOS.
And today the answer looks like a real big no.
But...
WP7 does seem to have some good games and it does seem to have most of the "big" apps you need. Things like twitter, 4Square, Facebook, and Pandora.
I do not know if it has the Kindle and Barnes and Nobel ebook readers yet but those are IMHO must haves.
I do not see any bar code programs yet. That is a real fail if they are missing. More than once I have been at a store and seen something on sale, scanned it and found that I could get it cheaper nearby or online.
WP7 doesn't suck like WM6.5 did but is it better than Android and IOS4. I would have to say no.
And since this is seventh version of Microsofts phone OS I can not cut them slack for a "first try". My opinion is that for the market they are a day late and a dollar short.
If you are a big gamer and already have a Zune pass you may really like this phone. But I feel you will have a better selection of apps with Android and IOS4 for a very long time.
So is this a bomb? No it isn't trash. Is it a Smash hit? Not really.
It is a fizzle right now maybe Microsoft will pull it out in the end but right now it is lacking standard features that every other Smart phone on the market has and it has a small selection of apps.
It had a pretty UI but no multitasking.
That is my observations for what they are worth.
I expect nothing but and A class full featured Mobile OS from Microsoft. They are the biggest software company on the planet and they have had years to get it right. And by that standard this is a massive fail.

Did Microsoft Alter Windows Sales Figures?

[countertrolling]

Does the pope shit in the woods?

Replace "did" with "does"... And replace "Microsoft" with *

Re:Did Microsoft Alter Windows Sales Figures?

[mcgrew]

You are saying that MS doesn't alter sales figures.

Re:Did Microsoft Alter Windows Sales Figures?

[countertrolling]

No worse than anybody else... Nobody can get that big on a single set of books. It's just not possible. Too many palms to grease. In this economy, honesty is the anomaly..

IT anti-monopolies coordination central?

[h00manist]

The only way to combat monopolies is either government legislation, or strong, close coordination among multiple parties who share an opinion. No more-powerful-entity (government) combat, no public coordination, so the emperor's elite guard still holds the fort. Microsoft has created for itself plenty of enemies, but nobody seems to be able to agree on doing anything effective. I can understand a million independent programmers having trouble agreeing, but I really don't understand how or why Apple, Oracle, IBM, HP, Dell, etc haven't been able to coordinate and come up even with more reasonably competitive monopoly-breaking products which is in their strong interest.

Re:IT anti-monopolies coordination central?

[BrokenHalo]

The only way to combat monopolies...

Well, who says we need to combat them? We can just ignore them. Sure, that won't make them go away, but who cares?

Speculates

[jamesl]

InformationWeek speculates that ...

Another word for "speculate" is "guess." A news organization should do neither.

Re:Oh, yeah

[Eponymous Coward]

What do you mean XP looks pathetic?

BTW, I think the XP number is a bit low. There are millions of XP machines out there that never browse the internet. They are quietly running kiosks, embedded in industrial machinery, or executing tasks on corporate LANs. There isn't much reason to move these systems off of XP (that is until some genius plugs an ethernet cable into them).

And then Monkey Boy sells his stock

[bdsesq]

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.........

Re:And then Monkey Boy sells his stock

[je ne sais quoi]

By my count, it was $1.3 billion in early November. That's about 10% of his net worth of $13.1 billion. Bill Gates has been regularly selling off his stock for about two years now. He at least has the excuse that he needs to fund his foundation, and he doesn't work there any more anyway.

A few questions

[mangu]

The real question is who has the remaining 16.76% of the market? How much did they have one year ago? I remember when, not so long ago, Microsoft had about 95% of the desktop market.

Frankly, considering this trend, I would think twice before investing in Microsoft stock these days.

Re:Oh, yeah

[Eponymous Coward]

Fanboi? That's funny.

No, I wondered what the OP thought was pathetic about XP? Is it the OS itself? Is it pathetic that it is still in use? I really don't get it.

At this point, aren't all operating systems more or less equivalent? There are compelling applications out there that might lead one to need a particular OS, but the operating system by itself isn't very interesting.

Common Practice

[clyde_cadiddlehopper]

They're a Fortune 100 company. They did.

Yes. Most companies have a growing, but money-losing "star", a flat but highly profitable "cash cow" and a few others that are in between. It is common practice to disguise the actual performance of those business units by creatively defining segments for external SEC reporting.

Commerce is deceit

[sgage]

When will people realize that corporate commerce is based on deceit. Who the hell is surprised that MS is cooking the books?

news or not?

[glebovitz]

I am not exactly sure of the point of this article. IMHO financial accounting is an art and it is more about company appearance and image than concise financial reporting. IRS and accounting rules allow companies to manipulate the data to "hide" details that would otherwise disclose details about proprietary internal operations. If you look closely, you can usually find accounting trickery. This does not make the company "evil" or dishonest, it just allows them to both present honest financial information to share holders without disclosing proprietary information to competitors.

The important information to determine from publicly released financial data is 1) did the company increase revenues? 2) did they really turn a profit from revenue and costs, or is there unsustainable write offs involved, and 3) is the increase of revenue from growth or from accounting trickery. I am not sure it really matters if Microsoft is moving revenue around to bolster their windows sales figures, the question is sustainability.

XP "Downgrade"

[smitty97]

Of course the numbers are fake. Every computer sold today with XP on it counts as a Windows 7 sale, the "downgrade" is a BTO option.

Funny, hell

[ThatsNotPudding]

+Infinity Insightful.

Re:Naked PCs and/or reversion rights...

[tnk1]

While you are probably right in the sense that these numbers are being miscounted, I don't think many sales are being made of pre-loaded computers where the end user is removing Windows 7.

Sure, there are some people who move to Linux, but really, is it that large a number? In the geek market, maybe, but geeks either know how to build machines themselves or know how to get around preloading. And many times, they just get used equipment that can't run Windows well, but runs Linux just fine. As for everyone else, they want consumer computing either for small business, e-mail, web browsing or gaming. There's no good reason to go to Linux for any of those things and some very good reasons not to.

As for reversions, I think that would have been more of a substantial figure for Vista than Windows 7. Certainly, I don't see this being a big factor at all in the Consumer market. For the business market, reversion to XP still might be an issue, but I know for my part that while I have never seen a business machine with Vista on it, I have not seen anyone removing Windows 7 for XP on their new machines. Windows 7 provides the XP mode VM which seems to work just fine for anything I would have needed XP for.

To normal people MS is about computers.

[Stan92057]

To normal people MS is about computers. To wall street/stock owners MS is much much more.

Re:Naked PCs and/or reversion rights...

[tibman]

Windows XP was also out for a very long time.. longer than many PC's lifespans. Why not carry over the XP license from your old machine to the new one? Purchasing a new machine with a new copy(and license) of XP is a waste. I have the feeling win7 will be the same way.

Time to wake up.

[westlake]

this is why I hate not being able to just walk into a high street shop and buy a computer pre-loaded with Linux or with no OS pre-loaded at all...
far too many sales that end up with the OS being wiped to replace with Linux or else reversion rights being exercised to install XP are being counted as Windows 7 sales...

This is the geek in Fantasyland.

The webstat counts users not licensees - and it doesn't much matter whether you look at Net Applications, StatCounter or W3Schools. Win 7 took about a 20 to 25% market share in less than one year.

In the strongholds of FOSS, Win 7 is performing very, very, well against Linux. Germany

Bare bones sells to the hobbyist and the IT pro. The OEM PC as home appliance or office machine is sold under a warranty and will - at least ideally - arrive properly configured for respectable performance based on its price point and intended use.

If it doesn't, it goes back.

That is the middle class shopper's level of comfort in all things.

Walmart.com has 231 Windows laptops in stock for the holidays, 99 Windows desktops.

118 Windows printers, 80 webcams, 727 flavors of the Windows mouse, keyboard and joystick and about 1,000 retail boxed Windows software packages, equally divided between productivity apps and games.

Retailers love a product which can deliver such extraordinary after-market sales.

Shocking

[Zoxed]

I am shocked, shocked to find that Microsoft may be cheating.