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Strategies & Market Trends : P&S and STO Death Blow's
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To: t2 who wrote (24632)1/16/2003 6:51:38 PM
From: t2  Read Replies (1) of 30712
 
Mish, Unearned revenues are a liability until they are booked. These are amounts received for selling software but MSFT takes a conservative approach in their accounting for sales (used to be very conservative a few years until they got in trouble for that)

I guess MSFT factors in the windows/office patches/fixes/support that are offered later as a reason to not book the entire sale up front. I don't know what their current deferal percentages are...for example just take 30% for Windows. So if MSFT were to receive $100 per copy of windows, they would book $70 revenue and then take in the remainder over the life cycle of the product(2 to 3 years).

They ended up with a huge unearned revenue account that grew over the years--about 2billion of unbooked revenues. However in the last quarter it had a drop of about 270 million...and that makes their revenue miss even more significant...add to that the lower guidance for next quarter...this all makes the statement from the CFO about future growth for the company even more silly, imho.

That is also partly why we used to get wild swings in afterhours trading in MSFT...a lot of people would just look at the revenue/eps numbers. This time, we won't see any surprise gain in the stock tomorrrow, imo. Might even get a downgrade or two in the morning. I would short it or buy puts if for some reason it does not tank.
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