The actual 10K hasn’t been posted on the SEC site yet, so we can only look at the press release. The press release contained “unaudited” numbers, which means that Microsoft’s accounting firm hasn’t signed off on them yet. That said, they are probably fairly accurate. Putting out an inaccurate press release can attract SEC attention, in a bad way.
Consider these numbers for total earnings (in millions):
That’s a drop of $2,738,000,000.00, a lot of money in anyone’s book. Costs didn’t drop anywhere near as much:
That’s a drop of $1,046,000,000.00, again a lot of money in anyone’s books. But it means earnings by $1,692,000,000.00 more than costs, which means net income has dropped:
Curiously the dividend for FY 2009 was $0.52 per share, while the dividend for FY 2008 was $0.44 per share. It looks like Microsoft may have been trying to buy the share holder’s loyalty. If so, it failed. The price of Microsoft stock was $25.56 on Thursday. On Friday it opened at $23.66 and spent some time as low as $22.98, and ended the day at $23.50.
But there’s other numbers of importance. For instance Cash and Cash Equivalents:
Why did Cash and Cash Equivalents fall? Microsoft made a decent profit, it not as high as usual. Short-term investments were:
Total cash, cash equivalents, and short-term investments
This raises a question – with this much money available in cash, cash equivalents, and short term investments, why would Microsoft be making arrangements for a loan earlier this summer? Several sites have speculated that Microsoft is in really deep financial trouble. Quite frankly they aren’t. In an economy like this Microsoft’s report looks great. So why the loan? We don’t know. But there must be a reason.
Going further along we see Goodwill. Uhm, this is Microsoft. Who has any “Goodwill” towards the company? XBox360 players who’ve sufferer the Red Ring of Death? Windows Media buyers who got DRMed to death? Well, Microsoft does list it
And it shows a slight increase.
At this point the word “why” keeps coming up?
1) Why did Total assets climb nearly $5 billion?
2) How can Microsoft claim “Goodwill”?
3) Why did total Cash & Cash Equiv go up by $8 billion?
4) Why did Microsoft drop so many product lines – they had enough cash.
5) Why did they lay off over 5000 employees, again they had enough cash.
So OK. Profits are down. Earnings are down. This was expected. So why did the share price drop so fast and so far? Is someone playing with the stock? Probably not. Probably one or two of the large investors looked at the report, and decided that Microsoft just wasn’t worth the price, and started selling.
So how does this affect the Free Software Community? In small ways. Microsoft doesn’t have as much manuoeuvring room as they did. It’s not a huge difference, but it’s a difference. At the same time, the company has to be feeling a bit of desperation.
In operating systems they can’t compete with GNU/Linux on price or performance. They can’t compete with Apple on price or performance. They can’t compete with Solaris on price or performance. They can’t compete with BSD (any version) on price or performance.
In fact they can’t compete with any operating system, on any level. Except for pre-installs. They win hands down there. And you have to wonder why? An inferior product, taking the majority of the consumer, and a fair bit of the small business market. There has to be a reason. And we know the reason. It came out during the Iowa anti-trust case (and yes, I have a copy of the all of the files for Comes vs Microsoft).
In fact they can’t even compete on browsers, with pre-installs. Firefox, Opera, and Safari continue to gain market share. Apache owns the web server market, is more stable, and a lot harder to hack. Open Office is taking market share from Microsoft Office. Microsoft can’t buy market share in search.
Even taking all that into account, remember the hypothetical $5 million investment I talked about in Numbers – Microsoft Stock Prices Part 1? Curiously you could take the 223,313 shares and sell them for $5,247,855.50! So even after the Friday drop, Microsoft shares are worth more than they were on July 11th!
So yeah, Microsoft isn’t what it was. This is the first drop year over year in their history. What will be interesting will be seeing what the company’s fiscal performance will be in the first quarter. Will earnings continue to drop? Stay tuned.