Got root?
Posted on 08/05/2002 1:01:22 AM PDT by JameRetief
The Microsoft pin in the financial balloon
Pop goes the weasel vole
By : Sunday 04 August 2002, 10:35
That's Crazy Talk!
Maybe it is, and maybe it isn't. Financial systems are as robust as the weather, but there are theories that suggest a butterfly's wings can eventually lead to a hurricane. Any system where chaotic events can cascade can have some pretty extreme conditions through the alignment of rare events... just ask any mathy who understands fractals and chaos theories... and Microsoft is a tad bit bigger than the average corporate butterfly.
But let's take a look at the economic downturn and see if there are any MS links.
Bubble Bursting Factor #1
Profits - or a lack thereof. A lot of dot.bust companies burned up their handsome grubstakes (IPO Cash) without developing that oh-so-important habit of making money. Crazy? You bet. But who led the charge to give away services and products for free? Was it Microsoft?
Hmmmm... They did have that troublesome conflict with Netscape where they started to give away their browser "for free".
(Historical Note: Up until a certain point, Netscape was selling the browsers they were making. Microsoft didn't have an internet browser at first, because they were trying to convince people that the Internet was a silly idea, and that the public network to use was MSN. (The younger among us may find it hard to believe - but it's true) The first generation of MSN was a non-internet private network intended to coral every Windows user into a Microsoft sideshow, with Microsoft holding everybody's wallets.)
Microsoft was accused of predatory and unfair trade practices by many, but they parried the accusations, and played silly bugger games with Netscape until they managed to get people to accept ...er ...get tired of arguing... that a "free" browser was actually part of the operating system. A few silly people believe such claims even today. What a lot of folks really believe though, is that Microsoft used the tactic of giving browsers for free, to kill Netscape.
Hundreds of companies embarked on claiming their dot-com niches, despite the absence of a near term positive net revenue on their horizons.
Microsoft shone the way though, first with their browsers, and later with Hotmail. Give it away - don't worry about revenues today.
Not only did that dog not hunt, but it came back to bite the arses off many companies, and ripped out the throats of many others. The Microsoft lesson of "Look Ma... no revenues!" turned out to be a trick. Microsoft could get away with it because their pockets were deeper than almost everyone else's... combined. They played the game with other companies' core products - but not their own.
Bubble Bursting Factor #2
Fiscal Responsibility and the options game. Are there any significant companies that have played with options as loosely as Microsoft has? As far back as 1999, "The Economist" used the term "Bubble Trouble", and in a jolting article (1) alleged that Microsoft's 1998 declaration of $4.5 billion in profits would need to be adjusted DOWN by roughly $22.5 billion if the cost of options awarded that year, plus the change in the value of outstanding options, was deducted. Now there's no denying that Microsoft has produced perhaps the largest number of millionaire employees of any company in history, but if these options beggar shareholder value, and pull adjusted revenues deeply into the red, then isn't this precisely one of the reprehensible accounting practices that are now being abandoned by reputable companies like General Electric, and others?
What will happen to the stock market if Microsoft earnings are re-examined under a bright lamp, taking options into account, and a sea of red surfaces?
Microsoft was also alleged to be actively playing derivatives against its own stock - specifically selling puts. If that scenario has continued unabated since it was reported in 1999 (2) then Microsoft's recent decline in share price may be magnified by any unexpired PUT contracts they'd sold.
Apart from the questionable ethics of trading derivatives on your own companies stock, Microsoft has also not translated their purportedly huge profits and cash assets into a stream of dividends. Theoretically the value accrued becomes a component in an elevated share price – but that theory isn't much comfort for a lot of pension funds right now, and theories don't jump out of windows either.
Playing with options, and then failing to account for the expenses associated with them is, in all fairness, not a big deal if options aren't dealt out like candy on Halloween, but when employees look upon options as a significant part of their pay, then it can add up quickly.
It also makes for an interesting barometer of sorts when you see the employees running like rats off a sinking ship - selling their shares. (3)
Microsoft is a Leader
Like them or hate them, Microsoft is a leader. They have done many things that no other company has done, and perhaps some of this leadership has been ill conceived. What Microsoft's role in stock market's decline is will be debated by many, but if the option scenario is indeed as bad as some describe, then Microsoft may lead the markets much further into decline. Whether or not you like their products, or their tentacles, most of the debate around Microsoft controversies has revolved around technical and philosophical issues. If Microsoft restates their accounting, deducting the cost of options, and the change in the value of outstanding options and derivatives, then the technical and philosophical arguments may be drowned out.
And you thought your portfolio already had a haircut? µ
References
Got root?
F*ck Bill Gates, I'd like to see him go down just like the execs at arthur anderson or enron. This guy is one of the biggest crooks around.And, one of the biggest contributors to radical leftist causes.
Are you surprised?
BUT: Doesn't Palladium and the fascist EULAs Microsoft has sneaked into service packs smell of fear and desperation? Why treat your entire customer base as criminals - only paranoid people - and not in the good sense of Andy Grove style paranoid - would do that. Microsoft is drifting past agressive in an unhealthy direction. And that will, eventually, be reflected in some kind of financial disaster.
If I were Steve Jobs I'd have my lawyers working 24/7 on EULAs that customers can live with and I'd do an ad blitz on why you should not sell your PC's soul to Microsoft.
Why is this evil? For one thing, since software updates require administrator access to your PC, this effectively gives MS permission to gain admin access as and when they want to, for whatever purpose they want. It stops short of explicitly asking for permission to destroy data, but that's about all that's left.
In this same time period, Microsoft has had three CFOs. Nothing unusual about that, and nothing really attention-getting about these individuals pops up on the search engines.
Yeah, Connors made $4.5M on a stock option buy/sell last November. That's peanuts compared to what Bill has been doing lately.
I think it's gonna take a whole lot of diggin' to find any really stinky stuff here.
But what do I know?
"Predatory and unfair trade practices".
Sure, if you put the interests of their competitors above the interests of consumers.
people to accept ...er ...get tired of arguing... that a "free" browser was actually part of the operating system. A few silly people believe such claims even today.
Why is free in quotes? I'm scared now.
Nobody cares about computer scientists' definitions of operating systems. People care about having computers that do what they want with maximum transparency and consistency.
What a lot of folks really believe though, is that Microsoft used the tactic of giving browsers for free, to kill Netscape.
If only they'd succeeded. Netscape are a bunch of antitrust loving wieners.
Palladium is going too far for my tastes (on a home machine).
But I wouldn't sic the Department of Bribed Technical Illiterates on them, since no one is forced to use it.
Will customers put up with outlandish contracts?
I hope not! Microsoft has done great things, but I'd love to see it overgrown by Linux.
The Windows Media Player upgrade EULA, allowing Microsoft to shut down your media player if they don't like what music you're listening to, was the first iteration.
Apparently either a lot of people didn't notice it, or didn't care. Likely the former. Who reads a bunch of legalese when they apply a patch listed under "Critical?"
Having gotten away with that, now Microsoft has snuck a new EULA into XP SP1 and Win2K SP3. Check it out.
And how long until Microsoft starts shipping a new version of Office or Money or Visio and the installer will refuse to operate unless you have Win2K SP3 or better or XP with SP1 applied?
Most people don't read EULAs. Microsoft figures that if it is nice and quiet about it, and brushes off the few complaints with answers like,"It's just a standard legal thing the lawyers made us put it, don't worry about it," then once everyone has the new EULA, they can start going after a few high profile clients and make their point.
And that point is, "We own your data. You will pay what we tell you to pay or you'll never see it again."
Nice guys, those Microsoft fellas.
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