Hi Bill, Microsoft has just come out with a revenue and profit advisory. They claim that they are very optimistic on revenues. How can this be? Is this book-keeping magic? PC sales are very slack in general. Reports are that Windows 2000 is not selling as well as anticipated. Linux is growing like crazy in the server business that 2000 was supposed to own. Windows and Office XP have met great hostility because of the changes to licencing terms, especially the activation procedures. These depend of Microsoft Passport, which has just been out of service for about a week, believe it or not. In any case, could they record revenues from XP this soon? Office is barely out and Windows XP is in beta. There is also great reluctance in leasing anything from a monopoly.

Could this be an example of "cookie jar accounting"? Where could any increase in revenue come from?

It is also interesting to note that they are expecting next quarter losses because of so-called "investment losses" (I call them speculations). I am certain that their assumptions of returns in their pension fund accounting will not be consistent with their current investment returns! But I guess that all Microsoft employees are going to become "Microsoft millionaires", so they won't need pensions!

-- Donald W. Shantz (dwshantz@sprynet.com), July 12, 2001

Answers

I don't understand MSFT results at all. The market prediction was for 42c earning per share. MS are planning to announce 1c per share. What do they mean by a "non-cash" write off in telecoms investments? Is this why the losses are in fact the case. What does it mean for the employee share option scheme that MSFT is lower now than at this time last year? How can their results be described as "positive"?

No answers I'm afraid - I'm just trying to get to grips with financial markets, being a naive software person.

-- Matthew Gaylard (matnjill@eircom.net), July 14, 2001.

Hi Matthew,

The non-cash losses are easy to explain. Microsoft will declare an investment loss based on current market prices but no cash is involved becaused they don't plan to sell the shares. You must have heard of the saying (nowdays, heard mostly from dot-com investors), "You don't really lose until you sell.".

Trust me, you really have lost! If you don't believe me, go to one of those dot-com investors and ask him how much money he could raise by asking his broker for a margin loan and how much he could have raised before the dot-com bubble burst! This is how margin calls happen!

To top it off, many of those dot-coms have gone bankrupt and have liquidated. Their shares are worthless now and will remain so forever!

-- Donald W. Shantz (dwshantz@sprynet.com), July 15, 2001.

Mafiasoft is claiming $2.6 billion in "investment losses" this quarter. This will hurt them doubly, as it not only carves into their revenue for stock kiting, it also disallows $2.6 billion in tax rebates/write-offs they would get from printing up another batch of options.

-- Tom Nadeau (pcassembler@mindspring.com), July 16, 2001.

I believe Gates and his accountants have juiced up Microsoft revenue. PC vendors have been reporting dismayed PC sales (including servers), yet, Microsoft have reported from break-even to 5% gained revenue numbers regarded to OS software sales. I think Gates has performed the same maneuver to his MS Office sales.

About Windows and Office XP, I don't believe their sales will be meeting their expected target due to economy conditions. Microsoft and MSFT hypsters have been trying to trumpet hard these products for 1 simple reason, hyping. MS Office XP sale so far has been, again, slow. There are not many techical incentives for current MS Office 97 users to make their switches, besides, the new licensing scheme has already backfired Gates and Microsoft; new Office XP users will be very wary and reluctant to make their commitments, they are unsure about Gates' changing schemes; what will be their future hidden costs resulted from owning Gates' Office XP? Windows XP will share the same fate with MS Office XP, lagging sale.

Bill Gates has underestimated consumers' wisdom, they will not be willing to pay more than what they have to for Gates' MS Office, Gates has not ruled the world yet.

-- wallstreetgamer (wallstreetgamer@yahoo.com), August 05, 2001.