Thomas- I checked last years proxy statement and as far as I can tell Directors are elected annually and serve one year. This years proxy statement should be out in a couple of weeks so it should tell if Paul Allen is running for re-election.
I've always felt that having someone on the board who was so anxious to cash out was not in stockholders best interest. Not that the board is very effective anyway or else they might have reined in some of the Gate's excesses that got the company thrown into the slammer.
Harvey
P.S. In looking at the SEC files I came across the company's official risk factor disclaimer. I agree with all of the below:
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You should consider the following factors carefully before deciding to purchase shares of our common stock. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.
Our current position in the market for computer software is continuously threatened because this market is intensely competitive and technology is constantly changing.
Microsoft is the leading producer of software for personal computers, PCs, in the world. Nonetheless, rapid change, uncertainty due to new and emerging technologies, and fierce competition characterize the PC software industry, which means that our market position is always at risk. Our ability to maintain our current market share may depend upon our ability to satisfy customer requirements, enhance existing products, develop and introduce new products and achieve market acceptance of such products. This process is challenging since the pace of change continues to accelerate, including "open source" software, new computing devices, new microprocessor architectures, the Internet, and Web-based computing models. If we do not successfully identify new product opportunities and develop and bring new products to market in a timely and cost-efficient manner, our business growth will suffer and demand for our products will decrease.
Further, the PC software industry is inherently complex. New products and product enhancements can require long development and testing periods. Significant delays in new product releases or significant problems in creating new products could damage our business.
The competition in the PC software industry is intense and may have multiple effects. For example, competing companies and systems may gain market share, which could have the effect of directly or indirectly reducing our existing market share. In addition, competitors, working with new technology, may arrive at a technology that creates a new market altogether and renders our product offerings obsolete. We expect that the overall number of competitors providing niche products that compete with ours will increase due to the market's attractive growth.
While we work closely with computer manufacturers and developers, other companies promote their platforms and
technologies against our products and existing industry standards. These operating systems, platforms, and products may gain popularity with customers, computer manufacturers, and developers, reducing our future revenues. For example, we are engaged in intense competition with companies that develop and support operating systems such as the open source Linux operating system and Unix operating systems for many business installations. These competitors include Caldera Systems, Inc., Red Hat, Inc., IBM and Sun Microsystems, Inc. This increased level of competition may result in price reductions, lower-than-expected gross margins or our inability to maintain our market share, any of which may result in a loss of revenue and cause our business to suffer.
Because of increasing competition in the PC industry, we may experience reduced product sales and lower revenue growth.
The nature of the PC market is changing in ways that may reduce our software sales and our revenue growth. We earn a
portion of our revenue by licensing our software to PC manufacturers, who install Microsoft applications during production and sell PCs to consumers that are fully operational at the time of purchaser. Recently, manufacturers have sought to reach more consumers by developing and producing lower cost PCs--PCs that come without pre-installed software or contain software
with reduced functionality to keep prices down.
In addition to the influx of low-cost PCs, a market for hand-held computing and communication devices, like hand-held computers and wireless communication devices that have the ability to communicate with the Internet, has developed.
While these devices are not as powerful or versatile as PCs, they threaten to erode sales growth in the market for PCs with pre-installed software. This may affect our revenue growth because manufacturers may choose not to install Microsoft software in these low-cost PCs or consumers may purchase alternative devices that do not utilize Microsoft software. These lower-priced devices require us to provide lower-priced software with a subset of the original functionality. As a result, we will experience slower revenue growth from the sale of software produced for these devices than from the sale of software for traditional PCs.
In addition, in response to present and future anticipated competitive pressures in our industry, we are providing alternative distribution of our products at a cost lower than if the customer were to purchase the individual products in a shrink wrapped box at a traditional retail, mail order or online store. For instance, we offer suites of software products like the Microsoft Office suite, which is a collection of standalone products such as Excel, Word, Outlook and PowerPoint. By packaging the products as a suite, we offer the customers the opportunity to purchase a license to use a collection of products for less cost than
purchasing each of the individually-licensed products in standard boxes from a retail, mail order or online store. Additionally, we are offering products through alternative distribution channels than the standard individually shrink wrapped boxes sold through traditional retail vendors. These channels include:
. Licensing agreements--customers may purchase multiple-user licenses for a suite of products for a lower cost than paying for each license separately
. Subscriptions--customers may enter into an annual gold license, which entitles them to automatic upgrades and replacement products for a lower cost than acquiring upgrades and replacement products on an individual basis
. Downloads over the Internet--customers are able to download service releases and upgrades as well as other products directly from the Internet
As a result of responding to competitive pressures in the marketplace by offering products through alternative distribution methods, we may experience slower revenue growth.
Prices of our products could decrease, which would reduce our net income.
The competitive factors described above may require us to lower product prices to meet competition. Since our cost of revenue is already very low, price reductions would reduce our net income.
Developing software is expensive, and the investment in product development often involves a long payback cycle.
Our continued success depends in part on our continued ability to create more versatile software products faster than our competitors. We plan to continue significant investments in software research and development. We also expend significant resources on researching and developing new technologies such as voice recognition and ClearType software, a software that provides improved font sharpness and text display on color LCD screens allowing for better on-screen reading comparable to reading on paper. We are also making significant investments in strategic relationships with third parties, and in online products and services such as MSN, CarPoint, and HomeAdvisor, where we have the opportunity to establish leadership in new businesses. We anticipate these investments in research and development will increase over historical spending levels without corresponding growth in revenues in the near future. We cannot assure that significant revenue from these product opportunities will be achieved for a number of years, if at all.
Our profit margins internationally may be threatened by factors in other countries that are outside of our control and force down the price of our software relative to our costs.
We develop and sell our products throughout the world. The prices of our products in countries outside of the United States are generally higher than our prices in the United States because of the costs incurred in localizing software for non-U.S. markets and the costs of producing and selling our products in these countries are also higher. Pressures
to globalize our pricing structure might require that we reduce the sales price of our software in other countries, even though the costs of the software continue to be higher than in the United States. This would reduce our margins and result in overall declines in our revenue growth.
Negative changes in the following factors, among others, could also have an impact on our business and results of operations outside of the United States:
. software "piracy" trade protection laws, policies and measures and other regulatory requirements affecting trade and investment;
. unexpected changes in regulatory requirements for software;
. social, political, labor or economic conditions in a specific country or region;
. difficulties in staffing and managing foreign operations; and
. potential adverse foreign tax consequences.
Our intellectual property rights may be difficult to protect.
We diligently defend our intellectual property rights, but unlicensed copying of software represents a loss of revenue. While this adversely affects U.S. revenue, revenue loss is even more significant outside of the U.S., particularly in countries where laws are less protective of intellectual property rights. Throughout the world, we actively educate consumers on the benefits of licensing genuine products and educate lawmakers on the advantages of a business climate where intellectual property rights are protected. However, continued efforts may not affect revenue positively.
We cannot predict the outcome or impact of antitrust claims by the U.S. and several states.
We are a defendant in a lawsuit filed by the Antitrust Division of the U.S. Department of Justice and a group of several state attorneys general alleging violations of the Sherman Act and various state antitrust laws. After the trial, the District Court entered the Findings of Fact and Conclusions of Law stating that we had violated sections of the Sherman Act and various state antitrust laws. A Judgment was entered on June 7, 2000 ordering, among other things, the breakup of Microsoft into two companies. In addition, the Judgment, if not stayed or modified, would impose severe product design and business conduct restrictions. We filed a motion with the District Court on June 7, 2000 seeking to stay all provisions of the Judgment pending appeal and, on June 13, 2000, we filed an appeal of the Judgment and a motion in the Court of Appeals to stay or suspend the
conduct restrictions pending appeal. On June 20, 2000, the District Court entered an order staying the Judgment of June 7, 2000 in its entirety until the appeal therefrom is heard and decided, unless the stay is earlier vacated by an appellate court.
Although we believe we will obtain ultimate relief from the Judgment, we can not predict with certainty when or the extent to which such relief will be obtained. The failure to obtain sufficient relief through the appeal could have a material adverse effect on the value of Microsoft's common stock and/or the stock of the two resulting companies if the divestiture is finally approved.
For more information concerning this litigation, particularly the current status of the litigation which is changing very rapidly, you are encouraged to review our other SEC filings, which are incorporated below under "Where You Can Find More Information" and copies of orders, motions, briefs and other court filings that are available at the following websites:
www.microsoft.com/presspass/trial/default.asp, www.usdoj.gov/atr/cases/ms index.htm, and
www.dcd.uscourts.gov/microsoft-all.html.
We may not be able to maintain our present revenue growth rate or operating margins.
Our revenue growth rate in 2000 may not approach the level attained in prior years. Operating expenses are expected to increase from historical levels. Because of the fixed nature of a significant portion of such expenses, coupled with the possibility of slower revenue growth, operating margins may decrease from historical levels. |
