[Am-info] Fool's selling Microsoft stock

[John J. Urbaniak]

Sujal Shah wrote:

> On Tue, 2002-08-06 at 07:13, John J. Urbaniak wrote:
> > As I posted here last week, for FY 2001, Microsoft overstated the company's
> > profits by 45% or about 2.5 BILLION dollars due to stock options.  No wonder the
> > Motley Fool dumped them.
> >
> > First will come the employee's lawsuits, then the shareholder's lawsuits, then
> > Microsoft's cash hoard will be gone.
>
> I think you underestimate how much 40 billion dollars truly is.  I can't
> imagine any pair of class action suits that would even approach 10
> billion, let alone 40 billion.

Well, there are somewhere between 6 and 9 billion Microsoft shares of stock
outstanding.  Let's say it's 8 billion shares.

$40 billion divided by 8 billion is $5.00 per share.

$5.00 per share does not seem to be an exorbitant amount for a class action suit,
especially if it can be proven that Microsoft overstated its earnings by roughly that
amount.

In 2001, as I pointed out before, Microsoft overstated its earnings by 41 cents.  That
leaves $4.59 to go.  But we haven't even looked at 1998 - 2000.  It has been reported
that Microsoft paid no federal income taxes in 1998 and 1999 in spite of
multi-billions in reported earnings.  I betcha if you go back to 1994, you can easily
come up with a total of $5.00 per share overstatement of earnings.

Microsoft has never shown reticence when discussing (hyping) its products or cash.
But they have been strangely quiet about accounting for *true* earnings.  If I were a
class-action lawyer, I would point out all the bragging Microsoft has done about
*everything but* its true financial situation.  If I were on a jury evaluating the
company's behavior, I'd have to conclude that they indeed misrepresented the true
situtaion by at least $5.00 per share.

John


John


> Does anyone know what the largest civil settlement ever is?
>
> Sujal
>
> >
> > John
> >
> >
> >
> > Joe Moore wrote:
> >
> > > Microsoft (MSFT) is being removed from The Motley Fool's "rule-maker"
> > > portfolio of companies.
> > >
> > > http://www.fool.com/portfolios/RuleMaker/2002/rulemaker020731.htm
> > >
> > > Interesting reasons:
> > > > It all comes down to an issue of character. In this case the company has
> > > > failed to maintain the best interests of outside shareowners. By declining
> > > > to show true leadership on the stock option expensing issue -- which
> > > > management claims to agree with -- Microsoft no longer meets the criteria
> > > > of a Rule Maker company.
> > >
> > > -------
> > > > We've known for years that Microsoft was a serial user of various accounting
> > > > tricks to "groom" earnings, including delaying revenues for use in later
> > > > quarters.
> > >
> > > ------
> > > > Microsoft had the opportunity to show true leadership, and it declined.
> > >
> > > --Joe
> > > _______________________________________________
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