Could Microsoft Really Be Doing This Well?
April 19, 2001 7:18 PM   Subscribe

Could Microsoft Really Be Doing This Well? Microsoft's earnings up 14%? I find this rather suspect. Any thoughts (standard NYTimes Link caveats...)?
posted by ParisParamus (23 comments total)
Specifically, the economy hasn't done very well recently; PCs aren't selling; what's going on here?
posted by ParisParamus at 7:20 PM on April 19, 2001

As the article said, their ramping up in the Enterprise arena - and I bet their web properties are doing better. Why so suspicious?
posted by owillis at 7:22 PM on April 19, 2001

Why so suspicious?

Because Microsoft is the devil's work :)
posted by Zool at 7:36 PM on April 19, 2001

Microsoft also has a history of reporting "bad news" to investors and then "surprising" everyone when they blow their expected earnings out of the water.

More importantly, though, they have the smartest people in the world and no debt, which usually is good for profits =).

posted by Kevs at 8:16 PM on April 19, 2001

Why so suspicious? Because 14% is a lot, and it doesn't feel right.
posted by ParisParamus at 8:18 PM on April 19, 2001

I hope those are not the smartest people in the world: that would be even scarier than MS already is.
posted by ParisParamus at 8:23 PM on April 19, 2001

I doubt it's really true. Microsoft has a long history of creative accounting to impress Wall Street and reduce taxes.
Remember last year? When they didn't pay a dime in taxes because they were able to report a net loss to the IRS? Nobody was selling their stock short because of it...

They've also used this to hide profits from more questionable business activities - one quarter they reported a large profit jump, attributed to the cost savings from replacing floppy disks with CD-ROMs. "No, we're not a monopoly. Floppy disks are just really expensive!"
posted by adamsc at 9:01 PM on April 19, 2001

Standard NY Times no-registration backdoor link here.
posted by nicwolff at 9:04 PM on April 19, 2001

There's a lot of overblown rhetoric about the PC market which has lead here, I think, to a mistaken impression.

PC sales are not down. PC sales now are higher than they've ever been. But the growth this year was lower than in recent years, and the press has been referring to this as a "slowdown", which isn't quite accurate. ("Less acceleration" is more accurate.)

PC sales are up, which is why Microsoft sales are up. There isn't anything suspicious about this.
posted by Steven Den Beste at 10:01 PM on April 19, 2001

posted by ParisParamus at 10:07 PM on April 19, 2001

With my commanding ownership of .0000007% of the company, this is great news. MSFT is up 2.6 points. No worries here.
posted by ktheory at 11:13 PM on April 19, 2001

Also, Paris, despite the ease with which most of us dismiss Microsoft, they do have a whole lot of insanely smart people working for them.

They don't own the market, certainly, but it's been their practice since they incorporated to hire the smartest people they're able to, and reward those smart people abundantly.
posted by cCranium at 6:37 AM on April 20, 2001

As an accountant, I can tell you there are a million techniques Microsoft could use to pump up their net profits, especially if their goal was to create a large gain for only a quarter or two. Long-term changes are harder to pull off. But with the amount of cash they have to work with, I would say they could make their financials look any way they want, regardless of reality.

Microsoft is also quite skilled in keeping expectations low so the predictions aren't hard to beat. It surprises me a little that the shareholders and forecasters don't see this year after year and set their own expectations somewhat above Microsoft's predictions. Regardless, they continue to work the system about as efficiently as anyone.
posted by goto11 at 6:49 AM on April 20, 2001

PC unit sales up 3.5% over 1 year ago. Nearly all of those ship with a Microsoft OS (not to mention many shipping with Office).
posted by Steven Den Beste at 8:52 AM on April 20, 2001

On the other hand, as the Wall Street Journal reports, U.S. sales of PCs contracted for the first time since 1994. A mixed bag (and Microsoft trimmed it's forecast of worldwide PC sales growth from 10% to 7% for the whole year).
posted by snarkout at 9:24 AM on April 20, 2001

The reason this sounds fishy is that the replacement/upgrade of computers and software is close to the last thing a company needs to invest in when the economy goes soft--especially the type of software our friend Bill makes ("do I really need the latest upgrade?" "A somewhat faster PC?"). So either the economy sucks or it doesn't. Or is the "economic downturn" just the people in office and their surrogates attempting to dis the Clinton legacy some more? Fishy Fishy Fishy!
posted by ParisParamus at 10:32 AM on April 20, 2001

14% is a lot

For Microsoft, 14% is not a lot.
posted by daveadams at 10:44 AM on April 20, 2001

daveadams, 14% is 14% of whatever MS previously was. It's a lot, and fishy.
posted by ParisParamus at 10:59 AM on April 20, 2001

Net income on a yearly basis are basically flat, according to the official figures. They've taken a big loss on equity investees, which is understandable, and there's also a mysterious $375m charge accounted to the "Cumulative effect of accounting change". Anyone with a professional insight on this "change"?
posted by holgate at 12:39 PM on April 20, 2001

Seems that much of the revenue growth came from finally getting Windows 2000 Datacenter Server to market; it's a big-ticket item, and they're taking business from Oracle and Sun, both of whom are hurting.

Why are these upgrades happening in a weakening economy? Partly because companies held off on a lot of projects while they battened down the hatches for Y2K. A lot of pent-up demand was released last year, and some of those projects are multi-month upgrades that may take some time yet to wind down.

So there's some substance to this. I wouldn't be surprised, though, if M$ were using the moment to disguise something else.
posted by dhartung at 3:56 PM on April 20, 2001

Why are these upgrades happening in a weakening economy? Partly because companies held off on a lot of projects while they battened down the hatches for Y2K.

I'm sorry, but this, too, makes no sense to me. I would think Y2K would have accellerated spending in 1999, and that the act of upgrading for Y2K would have dovetailed with normal purchases to the point that spending for several years post-Y2K would be depressed:"We don't really need Windows 2000 [or whatever they called it], Windows 95 might not work after Y2K, so lets buy this in 1999, instead of 2001".

I was thinking of a conspiracy with the White House: make the economy look better than it is (or undo my talking down of the economy) and we'll drop the Antitrust thing...
posted by ParisParamus at 5:32 PM on April 20, 2001

Companies put all their money into "fixing" Y2K, then held on to it during the market tank. There are conspiracies out there, but there ain't one here.
posted by owillis at 5:36 PM on April 20, 2001

Yep, the post-Y2K thing in the corporate sector has been described as a "nuclear winter". MS has the advantage of its tremendous hold on the OEM market (rabid anti-MSers would call it the "Microsoft tax", but it's a testament to their success.) which sustains them in the consumer sector. (Interestingly, Apple seems to be doing well, too.)

The real meltdown's at the semiconductor/appliance end, though. Ericsson announced a 90% drop in pre-tax earnings today, with 12,000 layoffs.
posted by holgate at 5:53 PM on April 20, 2001

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