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Technology Stocks : MSFT Internet Explorer vs. NSCP Navigator
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To: Gerald R. Lampton who wrote (3273)11/21/1996 3:16:00 AM
From: damniseedemons   of 24154
 
Gerald, since I'm studying for my accounting test, I feel obligated to answer your questions:

MSFT is using a 100% legititmate account method--similar to how magazine companies realize revenue. MSFT has chosen to realize revenue over a two-year period.

There are a couple of reasons for this:

1) To eliminate revenue spikes, and ensure a smooth revenue growth curve. Revenue spikes would otherwise occur with every major product launch.

2) It costs very little to actually produce (not develop) software. Yet, after the software is sold, MSFT will face technical support costs for the lifetime of the product, which is assumed to be 2 years, and is amortized as such.

3) MSFT can save some revenue for a rainy quarter.

4) [Damnit, this one was important, and I can't think of it right now]
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