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A More Detailed Analysis of the Financial Reports: An Illustration of Microsoft

Module 10. A More Detailed Analysis of the Financial Reports: An Illustration of Microsoft. Di (Wendy) Wang. Background. Brief Overview. Founded in April 4, 1975 by Bill Gates, Paul Allen Headquarter: Redmond, WA Operating segments: --Windows Division --Server and Tools

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A More Detailed Analysis of the Financial Reports: An Illustration of Microsoft

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  1. Module 10 A More Detailed Analysis of the Financial Reports: An Illustration of Microsoft Di (Wendy) Wang

  2. Background

  3. Brief Overview • Founded in April 4, 1975 by Bill Gates, Paul Allen • Headquarter: Redmond, WA • Operating segments: • --Windows Division • --Server and Tools • --Online Service Division • --Microsoft Business Division • --Entertainment and Devices Division • Net income as of June 30, 2013: $21,863 million • Total assets as of as of June 30, 2013: $142,431 million

  4. Strengths • Brand reputation • --named as the company with the best reputation for CSR for the 2nd year • Brand loyalty • --92% of the desktop operating system market share • Strong distribution channels • --OEM(original equipment manufacturers) pre-install software on new PCs, smart phones, and other intelligent devices that are sold to end customers • --distributors and resellers • --online

  5. Weaknesses • Slow innovation • --ex-CEO Gates admit that Microsoft failed to "get out in the lead very early" in the mobile market, labeling the way the company developed its mobile products later than others as "clearly a mistake" --missed the opportunity to be the first player in online advertising • Dependency on hardware manufacturers • --depends on computer hardware manufacturers to develop products that run Windows Operating System • Poor M&A strategy • --in 1997, Microsoft purchased Seattle-based aQuantive for $6.3 billion in cash— at the time the largest acquisition in the software giant’s history • --five years later in 2002, Microsoft took a $6.2 billion writedown, largely tied to aQuantive

  6. Opportunities • Providing services for enterprises • --businesses look to Microsoft’s business applications like Microsoft Dynamics, Office, Exchange, SharePoint, Lync, Yammer, and its business intelligence solutions • Developing new form factors that have increasingly natural ways to use them • --including touch, gesture, and speech • Establishing Windows platform across the PC, tablet, phone, server, and cloud • --delivering seamless services and experiences across devices • --e.g. Windows 8: designed to unite the light, thin, and convenient aspects of a tablet with the power of a PC

  7. Threats • Lawsuits • -- a large number of antitrust and unfair competition class action lawsuits filed against Microsoft in various state, federal, and Canadian courts on behalf of various classes of direct and indirect purchasers of its PC operating system and certain other software products between 1999 and 2005 • --patent and intellectual property claims • Traditional businesses are in a period of transition • -- Windows operating system • -- competitors are developing new devices, services, and platforms • Customer preference evolves rapidly • -- cloud-based services

  8. NOTE 4 – INVESTMENTS, 2013

  9. NOTE 4 – INVESTMENTS, 2012

  10. NOTE 7 – INVENTORIES

  11. NOTE 8 - PROPERTY AND EQUIPMENT

  12. NOTE 10 - GOODWILL

  13. NOTE 11 - INTANGIBLE ASSETS

  14. NOTE 13 - INCOME TAXES

  15. NOTE 13 - INCOME TAXES

  16. NOTE 15 - OTHER LONG-TERM LIABILITY

  17. Expanded Balance Sheet

  18. Expanded Balance Sheet

  19. Expanded Balance Sheet

  20. NOTE 21 SEGMENT INFORMATION By division

  21. NOTE 21 SEGMENT INFORMATION By main products

  22. NOTE 21 SEGMENT INFORMATION By division

  23. NOTE 3 - OTHER INCOME (EXPENSE)

  24. NOTE 13 – INCOME TAXES

  25. NOTE 13 – INCOME TAXES

  26. Expanded Income Statement

  27. Expanded Income Statement

  28. Income Tax Rate Revisited • Initial assumption: 37% • Another option is the effective tax rate disclosed in Note 13 Adjustments to statutory rate not related to financing • Continue to use: 37%

  29. Sources: • Microsoft Form10-K For the Fiscal Year Ended June 30, 2011 • http://apps.shareholder.com/sec/viewerContent.aspx?companyid=MSFT&docid=8062497 • Microsoft Form10-K For the Fiscal Year Ended June 30, 2012 • http://apps.shareholder.com/sec/viewerContent.aspx?companyid=MSFT&docid=8733512 • Microsoft Form10-K For the Fiscal Year Ended June 30, 2013 • http://apps.shareholder.com/sec/viewerContent.aspx?companyid=MSFT&docid=9422625

  30. THANK YOU!

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