How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 488.61

-0.7%

1:37 PM EST

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To: JC Jaros who wrote (47968)	7/18/2000 6:22:06 PM
From: rudedog	Read Replies (3) of 74651

JC - well, I guess I have to weigh in on the "unearned income" line, since we have had several completely uninformed opinions. Unearned income is not investment income or any nonsense like that - it is sale of product which will ship in the future. This is primarily from the future value of select agreements, which are corporate agreements to purchase software over a period of time, usually 3 years. Customers pre-pay a portion of those agreements ahead of time. This generates product revenue which MSFT has traditionally recognized as "unearned income" - it becomes earned income when the agreements are satisfied by product "shipments". These are not actual shipments - the select customer just tells MSFT what they have installed. Select agreements are administered by a Large Account Reseller or LAR who administers the contracts and manages payments from the select customers. So "unearned income" is real product revenue, with deferred recognition.

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