Microsoft Earnings Jump Nearly 82 Percent

[LiviaOlivia]

http://www.nytimes.com/aponline/business/AP-Earns-Microsoft.html

July 22, 2004
Microsoft Earnings Jump Nearly 82 Percent
By THE ASSOCIATED PRESS

Filed at 5:08 p.m. ET

SEATTLE (AP) -- Microsoft Corp.'s earnings rose nearly 82 percent in its fiscal fourth quarter, helped slightly by a tax benefit, and the software maker raised revenue expectations slightly for the coming fiscal year. But the latest quarter's results were short of analysts' expectations and the stock fell.

Earnings for the three months ended June 30 were $2.69 billion, or 25 cents per share, up from $1.48 billion or 14 cents per share in the same period a year earlier. The most recent earnings included a $208 million tax benefit.

Revenue grew 15 percent to $9.29 billion, up from nearly $8.07 billion a year earlier.

Microsoft said earlier this week that it plans to pay a one-time dividend of $3 per share, at a cost of $32 billion, as part of plans to return a substantial chunk of its cash hoard back to shareholders.

The earnings per share figures for the most recent quarter included a 5 cent charge for stock-based compensation expense and the 2 cent per share tax benefit. The results for the same period a year earlier included a a charge of 4 cents per share for stock-based compensation expense, as well as another charge of 5 cents per share to settle its lawsuit with AOL.

<snip>

[LastDemocratInSC]

1. "What do you want to do today?" Remember their advertising slogan?

Whatever it is you want to do today, you'll do it the same way that everyone else does it because there will be only one way of doing anything with a computer. Just try to have a product that is different from all the others in your market. Using the same tools, trying to do the same things, your product will be just like your competitors' products. The innovative ideas that you have as a thinker will be nulled out by the monoculture of your industry. One computer platform, one computer language, one database tool, one way to the web, one way to think, feel, and act.

Your success will eventually become just an extension of Microsoft's success. Eventually, your profits will become their profits because they will own you even as you pay them for their software. They will do what IBM did - they will own the software - you will pay them to use it - they will own your ass.

What a major mess all you Microsoft people are creating for the rest of us who use better tools. Shame on all of you sheep.

[cthrumatrix]

21. outsourcing to India must be "profitable"....

[shanti]

2. can you say....

outsourcing??? i knew you could!

[mrbassman03]

4. outsourcing.... so what?

Living in the Bellevue/Redmond area, I can certainly tell you that the economy is not shutting down here, as many critics of outsourcing would lead you to believe. The success of Microsoft is critical to the local economy and this news will bring a much needed boost.

[feedppl]

5. Think locally, screw globally.

[mrbassman03]

9. Even thinking globally...

Well, OK, let's think globally... These jobs are obviously going somewhere (usually India) and creating opportunities there. "According to some estimates, 487 million middle-class Indians will spend an additional $420 billion during the next four years." India's economy is expected to grow by 7.2% this year. "American exports to India grew by $1 billion to $5 billion last year. That's one hell of a pie to share around. Indians have already spent $2 billion on equipment manufactured by a single company - Nokia." So stop complaining.

[LastDemocratInSC]

11. I have some questions for you

1: Why should an American company care about creating jobs in India?

2: Assuming that 487 million middle class Indians will spend 420 billion dollars in the next 4 years (approximaely $260 per Indian per year - some pie), how is that good news for we Americans?

3: Are you aware that the $2 billion the Indians spent on Nokia equipment went to a Swedish company?

Please respond.

[mrbassman03]

13. Response...

Glad to answer...

1 & 2. Outsourcing is usually looked at as a way to spend slightly less (sometimes much less) on wages. This provides some incentive for companies where large amounts of intellectual manpower are needed. For tech companies, this proves to be a great business opportunity. By also outsourcing to a marketplace where the demand for the product is great, they are able to save money on the wages and open up a large new market for their product. If the Indian population has much more money to spend and the demand is for these ubiquitous American products, it would be beneficial for these companies to take advantage of this new marketplace.

3. Yes, of course. Nokia was just one of the top products that the Indian population purchased last year. The other top three brands were Nike, McDonald's, and Levis. I really have to say that though I REALLY would not like to see a culture overrun with these brands, the demand for these products creates huge opportunities for US businesses.

Thanks for caring about this topic and being willing to discuss.

[leesa]

14. Who's gonna buy the crap that is made when no one has jobs?

[mrbassman03]

15. the point is they HAVE jobs...

The reason a company would have incentive to outsource to a market where its own product was in demand is that they are simultaneously saving money on wages and enabling a new segment of the population to purchase that product.

[Zidane]

31. Hmm...

Outsourcing is only the tip of the ice berg.

[redqueen]

32. They have jobs that pay less, they have less spending power

than the person who had that job before.

The consumer dollar is 2/3 of the engine that drives the economy.

And people wonder why the economy is stagnating while the GDP soars.

:crazy:

[feedppl]

16. Huge opportunities for slave labor and low wages.

Nike, McDonald's and Levis? How many jobs will these produce in the US? 3 more CEOs and a corporate lawyer. WOW let me get my resume ready.

[mrbassman03]

18. I'm not talking about creating jobs in the US

To quote Clinton and a recent Business 2.0 article: "It's the global economy, stupid!".

[shanti]

25. oh i see

screw the american people, take their jobs, the profit line is the bottom line. right?

it's obvious you are one of the "haves" or the "have mores"...

[Art_from_Ark]

26. Don't count on Levi's producing jobs

They've been closing a bunch of their US factories, including the one at Fayetteville, Arkansas which shut its doors in 1998.

[LastDemocratInSC]

19. Some more questions for you

1: Given that you believe that oursourcing is usually good for companies dependent on large amounts of intellectual manpower, such as Microsoft, would you favor having Microsoft outsource all of its jobs to India?

2: Nike and Levis are American brands, but all of the manufacturing is done in China, the Carribean area, and Central America, so the benefits of those companies flow only to their stockholders. McDonalds buys its supplies as close to their outlets as possible, so I see no benefits to Americans there either, except to stockholders. Do you own stock in Nike, Levis or McDonalds?

3: What benefits flow from the companies you mentioned to everyday American citizens who are not stockholders? Does that matter to you?

[mrbassman03]

20. Some more responses...

1. No, I wouldn't. I will reply to this in a later message, I do not have time now.

2. I really do not know of any company where profits turn into money given back to the American people, so I was assuming that when talking about being good for the economy, it meant the stock market and shareholders. And yes, I own stock in Nike and McDonald's so I am obviously slanted in a view that would make me more money (greedy me).

3. The main benefit of outsourcing for the general American consumer is lower prices. I would much rather spend $20 for a pair of foreign-made pants than $80 for ones made in the US. (Though I do NOT support any form of child labor, this isn't about that). Locally, I would rather pay $1.50 a pound for great strawberries picked by illegal workers than $6.00 a pound for the same ones.

Out of time...

[Tims]

36. Short Sighted

Since you didn't respond to the possibility of outsourcing everything, let me just add this. Where do you draw the line and why. For years businesses justified their outsourcing by saying, "we are just outsourcing the low skilled jobs that nobody wants. All the 'important' and high paying jobs will stay here". Now the tune has changed. We were told, "go to school and get a better education because that is the only path to secure employment" (security is not the same a guarantee, it simply a reasonable expectation if I work hard I can reasonably expect to find employment). Now the high paying technical jobs are going overseas and we are told this somehow benefits us. If we loose our jobs we have no money to get a piece of the pie by investing in the stock market, so how does this help anyone but the people already at the top? If you measure economic success simply by the Dow Industrial Average, you are seeing a tiny part of the whole picture.

Your next response was totally stupid. Profits are returned to the American people in the form of paychecks. One cannot ignore the fact that there must be some source of income for people in order for an economy to survive. The multinational corporation could care less about the economic survival of Joe Blow American citizen. He will take his last cent then find another economy somewhere to exploit.

Your last example was a poor one. Prices have rarely dropped when jobs have been outsourced. Nike is prime example. When Nike moved one of their manufacturing plants from (I think) somewhere in the northwest US to somewhere in Southeast Asia (I can find the details if you wish), their production cost went from about $20.00 per pair of shoes to something like $0.20 - yet the price of their shoes remained the same. In other words, their profit margins went from about 60% to something like %90. So where was the saving to the consumer? Everying went to line the already bulging pockets of the investors. The public was screwed.

By your logic you would rather pay $0.50 a pound for strawberries picked by slave labor than $1.50 a pound for those picked by illegal workers. Profits cannot justify exploitation nor ethics be determined by success on Wall Street.

For over a century and a half our country rose to the most powerful economy in the world by using home grown labor and improving the lot of the middle class. This was a middle class who could buy the products produced and fuel the economy further. The great industrialist became unbelievably wealthy and built the most successful and productive industries on earth with a 2%-4% return on investment. Lowering prices at any cost is extremely short sighted. These effects are short lived because the lost jobs and lowered wages eventually catch up and the pressure to lower prices further builds quickly in an endless cycle where there is no real net gain (in fact, for most it is a net loss).

Where will you stand when -your- job is outsourced, or are you simply one of those who provides no useful added value to any product or service but simply places yourself in the path of money and skims off the top as it goes by? Just asking.

[RedStateDem]

29. ...another response from on observer

....1. Why should an American company care about creating jobs in India?

I believe your original assertion was that Microsoft was thinking locally, but screwing globally. The data suggests that the outsourced jobs (in India) are not screwing the Indians, but are enriching them. Thus, the fact that they are spending $2 billion on techno imports. If they're spending this much on imports, Microsofts wages are by no means screwing the Indians.

....2 Assuming that 487 million middle class Indians will spend 420 billion dollars in the next 4 years (approximaely $260 per Indian per year - some pie), how is that good news for we Americans?

Because part of the 420 billion dollars will be spent on American products, manufactured by Americans, as clearly noted: "American exports to India grew by $1 billion to $5 billion last year." In other words, Microsoft is employing Indians at fair wages, and the employees are turning around and spending those wages on American products manufactured by Americans. This is good.

....3. Are you aware that the $2 billion the Indians spent on Nokia equipment went to a Swedish company?

Of course. The point, I believe, was that industrial production and consumption is picking up across the board in India. Bill Clinton has recently expressed that he desires to spend the rest of his life redistributing the wealth of the west. Microsoft's outsourcing is a heckuva way to do it. And efficient, too. It results in fewer Indians being exploited by domestic capitalists in India (Indian employers will have to pay higher wages to compete with Microsoft's wages), and keeps software costs lower in the US so American workers do not have to work as many hours to afford Windows and other Microsoft products. Again, a decrease in the exploitation of America workers. Not too shabby!

RedStateDem

[Yavin4]

37. In The End, IT Outsourcing Will Be A Collasal Failure

Look at the Nasdaq today. After three years of aggressive outsourcing by major American IT companies, the Nasdaq is still well below its average highs in the boom years of the 1990s. Why? Because increased IT outsourcing has indeed lead to lower wages, but it has also lead to lower overall IT sales.

For every IT job sent to India, that has meant lost IT sales to Americans. A corporation that outsources it IT functionality also outsources buying the latest upgrades, buying it training courses for their employees, etc. Instead, they just order their functinality from overseas. The person that orders out for dinner every night is not going to buy groceries, frying pans, or cookbooks.

Finally, outsourcing WILL NOT raise the standard of living of the world's poor. After a decade of globalized free trade deals, Mexico is still largely a poor nation where many of its citizens flee to the U.S. looking for work. Neat little academic economic theories about globalization are meeting the harsh realities that it's more about seeing a hand full of global elite capitalist get even richer and nothing else.

[feedppl]

3. LINUX...by the people ...for the people.

Let them eat penquin poop.

[SayitAintSo]

7. Here Here ....

:toast:

[freetobegay]

6. Good for Microsoft!

[Yavin4]

8. What's There To Celebrate?

Microsoft Corp.'s earnings rose nearly 82 percent in its fiscal fourth quarter, helped slightly by a tax benefit, and the software maker raised revenue expectations slightly for the coming fiscal year. But the latest quarter's results were short of analysts' expectations and the stock fell.

The financial news media makes the political news media look respectable. That headline is completely misleading. The stock fell because M$ MISSED their earnings target.

On another note, in 2000, I worked with a guy that owned M$ stock which was worth over $74 a share. Today, it's trading around $27.00 a share.

[TahitiNut]

12. It split 2-1 in February 2003.

:shrug:

Splits: 21-Sep-87 <2:1>, 16-Apr-90 <2:1>, 27-Jun-91 <3:2>, 15-Jun-92 <3:2>, 23-May-94 <2:1>, 09-Dec-96 <2:1>, 23-Feb-98 <2:1>, 29-Mar-99 <2:1>, 18-Feb-03 <2:1>

A friend and coworker asked me for tech stock recommendations back in 1986-7.

I recommended MSFT.

I found out 5 years later he'd invested over $40,000.

:crazy:

[Yavin4]

22. Even With The Split...

The value of his shares are way, way down. He owned it at $74. The combined split value is only $54.

[TahitiNut]

24. Anyone that held an equity position in the market through ...

... 2000 just wasn't paying attention. All the respected independent advice was to move into cash and money markets. During Christmas 1999 I strongly warned people in my family to do this. Rarely, if ever, have I been more certain of a major market movement: the bubble was going to burst in 2000. Valuations were wayyyyy overboard. "Irrational exuberance" was a vast understatement. (No, I wasn't a Y2K-Chicken-Little. 35 years in MIS/IT made me smarter than that.)

[JayS]

28. We did this with our 401k Plan and other investments before...

...the crash. Thank God our investment adviser is a cynical old coot!

[He loved Big Brother]

10. Why did Microsoft

have to buy it's own stock if earnings were up 82%?

I'm confused.

[Yavin4]

23. Because The Earnings Increase Wan't That Good

Again, the Financial media is horrible. The headline is misleading.

[LiviaOlivia]

17. More MS in the news-LAT editorial

http://www.latimes.com/news/opinion/la-ed-microsoft22jul22,1,4632590.story

EDITORIAL
Microsoft's Macro Dollars

July 22, 2004

It's official. Microsoft won't be using its $56-billion cash hoard to buy a medium-sized country. The software giant instead will use its spare change to blunt shareholder criticism of its stalled stock price by issuing a one-time, $35-billion dividend. The payment — so large that economists probably will be able to track the effect on the U.S. economy — also underscored that the ongoing economic recovery has been friendlier to businesses and their owners than to workers making the widgets.

Microsoft's declaration of Christmas in July, and the fact that there are plenty of other cash-rich companies out there, is going to sound strange to heads of households struggling to get by on stunted paychecks. Industrial companies on the Standard & Poor's 500 stock index, for example, have a collective $555 billion in cash sitting in their treasuries — more than double what they had before the current economic recovery began. The existence of that corporate gold mine should increase head-scratching among workers whose hourly pay has failed to keep pace with the rising price of gasoline, milk and other necessities, including health insurance. Microsoft's corporate cash disbursement, believed to be the largest in U.S. history, also should provide competing story lines for presidential campaigns — proof for the Bush administration that its upper-class tax breaks are working, evidence for John Kerry that workers are stuck with the tab.

This shouldn't be read as a rap against Microsoft shareholders. They have grumbled for years about the pile of (their) cash that Microsoft accumulates at the rate of about $1 billion per month on the strength of its monopoly on Windows personal computer software. Given corporate America's track record of shareholder-financed spending sprees — think AOL Time Warner—the cash may be better spent by shareholders.

That leaves consumers, who make the entire Microsoft venture possible, with just a pittance of consolation. The deadline for a $1.1-billion rebate that Microsoft agreed to pay for allegedly overcharging Californians for Windows software recently was extended to Sept. 28. Rebate forms are available at http://www.microsoftcalsettlement.com .

The rebate check might at least make a down payment on a good anti-virus program.

<snip>

[JayS]

27. I'd bet they also recovered a big chunk of encumbered funds...

...used for legal expenses and/or settlements.

[Zidane]

30. I'm happy for Microsoft

Although their business practices (re: competition) may be questionable - as someone who has worked for them I can tell you that Microsoft treats its employees FAR better than the vast majority of companies I have worked for.

I would much rather have a giant Microsoft corporation than a giant Wal-mart corporation. It is unfortunate Microsoft takes so much heat from so many while corporations such as wal-mart get a free pass. There are so many other corporations that take part in getting corrupt pro-corporate republicans in to office. These corporations ultimate goal is to have everyone earning as little as possible, maximize profits at the expensive of workers, and screw over anyone that gets in the way. At least Microsoft doesn't operate that way. No one ever gets locked in Microsoft forced to work off the clock.

[spinbaby]

33. Really?

Isn't Microsoft notorious for hiring permatemps so they don't have to pay benefits?

[Zidane]

34. First I've heard of it

If that's done it must have been on a very very small scale.

[spinbaby]

35. No, it was big in the news a while back...

http://seattlepi.nwsource.com/business/msft111.shtml

http://www.theregister.co.uk/1998/11/25/permafrost_for_microsoft_permatemps/

http://more.abcnews.go.com/sections/scitech/moody35/