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Microsoft: Things have changed in the last two years

By slaytanic killer in MLP
Thu Dec 21, 2000 at 12:13:31 PM EST
Tags: News (all tags)
News

Here is a Cringely article on why Microsoft announced an earnings dip warning. The theory is that the announcement was financially unnecessary, and that it was a political move bý Ballmer to reshape MS into his image. In another announcement, "Ballmer said Microsoft would be withholding extra features from products to save money."

This looks like the face of MS will change, perhaps into something worse. It appears very much like the changes at Coca-Cola after Ivester took the reins -- Ivester was too controlling and Coke tumbled. But on the other hand, people underestmated Jack Welch before he took the reins of GE.


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Microsoft: Things have changed in the last two years | 9 comments (7 topical, 2 editorial, 0 hidden)
The Earnings Warning Is A Ploy (3.70 / 10) (#1)
by Carnage4Life on Thu Dec 21, 2000 at 06:27:10 AM EST

As Cringley accurately pointed out, Microsoft makes more profits than the rest of the computer industry combined. For the past decade or so, Microsoft has always under-stated their expected earnings and has consistently beaten them, all in a ruse to manipulate their stock price and make it look like they are actually affected by the amrket when in truth they affect the market.

An example of Microsoft's grand manipulation of the numbers is Ballmer's recent announcement of belt tightening which on the face of it makes it look like Microsoft is in trouble until one notices that he states that higher pay raises will be given out this quarter and the reduction in expenditure will be primarily done by cutting the jobs in the want ads.

I would be very surprised if Microsoft doesn't beat earnings and have their stock price climb back to the highs it is normally associated with in a few weeks/months.



Good Lord, that man is full of it (4.21 / 14) (#2)
by streetlawyer on Thu Dec 21, 2000 at 06:27:13 AM EST

This is pretty scurrilous stuff; no securities analyst would ever be allowed to chuck around such unproven assertions. If it were true that Microsoft were doing what Cringely says they are doing, Ballmer et al. would be opening themselves up to vast shareholder lawsuits. Effectively, he is accusing Microsoft of creating a false market in their shares, misleading their investors and potentially false accounting. All of which are pretty heavy rocks to throw around, on no evidence other than a few beers you once had with a dead guy who once worked at the company.

Furthermore, he is dead wrong on the substantive point which underpins his whole analysis. Companies do not "only make conference calls if sales have halved, or revenues are down 30 per cent". The rules are very clear; you make an announcement if you believe that the market's information is wrong to the extent that would make a material difference to the share price. For a company like MS which has always beaten its estimates, any miss is big news and certainly material. And, contrary to Cringely's assertion, it is not possible for a company to turn on a dime and randomly change its bill-paying, its operational strategy or its accounting policies late in the quarter, on receipt of bad news. Finally, the bad earnings news is relative to estimates; it doesn't matter a tinker's damn what MS foresaw or otherwise in the hardware market. The reason for the conference call was that the highly paid analysts of Wall Street had got their numbers wrong.

Finally, two other points; I dispute that MS has the "best financial people in the world"; such people would not allow the purchase of "crap" to manipulate earnings, and Microsoft does not in fact have a particularly impressive financing department. And the use of profits per employee as a metric is asinine in the context of a company like Microsoft which a) has a highly decentralised and outsourced production model and b) notoriously, makes extensive use of temps.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever

A better sign that things have changed at MSFT (3.30 / 10) (#3)
by Carnage4Life on Thu Dec 21, 2000 at 06:32:53 AM EST

If you are seeking a sign that things are finally changing at Microsoft, here it is; Joachim Tempin, the man most responsible for Microsoft's aggressive policies that got them in trouble with the DOJ has been put to pasture . Joachim Tempin is famous for making Faustian deals with OEMS which resulted in a number of companies being forced to swallow bitter pills including Netscape.



Does anyone else have doubts about this number? (2.75 / 4) (#5)
by Anonymous 242 on Thu Dec 21, 2000 at 09:43:33 AM EST

Cringely asserted:
Let's think about this news for a moment. Microsoft said its profit would ONLY be around $2.5 billion, which is to say more than all the rest of the personal computer software industry combined.

This statement just feels wrong for me. For example, IBM's software division alone dwarfs Microsoft. I have a hard time believing that all the computer companies in the US make less money combined than Microsoft. Perhaps Cringely meant the software industry, for which I could envision his statement being true, but I will still have a problem with it. Microsoft may have a guaranteed sale for 80 to 90 percent of Intel based computers, but I still have trouble accepting that Microsoft could have more profits than every other software maker combined.

Perhaps, Cringely is figuring including losses by bleeding companies into the figure, in which case the comparisson is a bit misleading.

Re: Does anyone else have doubts about this number (3.75 / 4) (#7)
by forgey on Thu Dec 21, 2000 at 09:59:15 AM EST

Take another look at what you quoted...

Let's think about this news for a moment. Microsoft said its profit would ONLY be around $2.5 billion, which is to say more than all the rest of the personal computer software industry combined.

He did say the PC Software industry. It is probably possible that the PC Software industry _profits_ are less than 2.5 billion (with MSFT), I won't take his word for it though.

forge

[ Parent ]

Read the quote again (3.66 / 3) (#8)
by delmoi on Thu Dec 21, 2000 at 10:00:02 AM EST

around $2.5 billion, which is to say more than all the rest of the personal computer software industry combined.

He's only talking about PC software, and in that light the statement isn't that hard to belive
--
"'argumentation' is not a word, idiot." -- thelizman
[ Parent ]
Cringely's correct - some figures (4.00 / 1) (#9)
by BadIvory on Thu Dec 21, 2000 at 05:24:46 PM EST

In revenue, Microsoft overtook IBM software division a couple of years ago. Last year Microsoft earned $22.9bn while IBM software has been steady, earning in the region of $14 to $14.5bn annually over the past few years.

Microsoft's profit y/e 30 June last was $9.4bn.

a

"The only good endian is a dead endian"
[ Parent ]

Microsoft: Things have changed in the last two years | 9 comments (7 topical, 2 editorial, 0 hidden)
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