| Years | Jul-Sep
02 |
Jun
02 |
Jun
01 |
Jun
00 |
Jun
99 |
Jun
98 |
Jun
97 |
Jun
96 |
Jun
95 |
Jun
94 |
98-02 5-yr
Annual Growth |
| Sales (billion US$) | 7.75 | 28.37 | 25.30 | 22.96 | 19.75 | 15.26 | 11.94 | 9.05 | 6.08 | 4.71 | |
| Sales Growth % | 26 | 12 | 10 | 16 | 29 | 28 | 32 | 49 | 29 | 21 | |
| Operating Income (billion US$) | 4.05 | 11.91 | 11.72 | 11.01 | 9.93 | 6.41 | 4.87 | 3.06 | 2.02 | 1.71 | |
| Op. Income Growth % | 40 | 2 | 6 | 10 | 55 | 32 | 59 | 51 | 18 | 26 | |
| Net Profit (billion US$) | 2.73 | 7.83 | 7.35 | 9.42 | 7.76 | 4.46 | 3.44 | 2.20 | 1.45 | 1.15 | |
| Earning Growth % | 112 | 6 | -22 | 21 | 74 | 30 | 57 | 51 | 27 | 27 | |
| Net Profit Margin % | 28 | 29 | 41 | 39 | 29 | 29 | 24 | 24 | 24 | ||
| Gross Margin % | 82 | 86 | 87 | 86 | 84 | 82 | 76 | 78 | 77 | ||
| Operating Margin % | 42 | 46 | 48 | 50 | 42 | 40 | 33 | 33 | 36 | ||
| Investment Income (% of Op.Income) | -3 | - | 22 | 15 | 10 | 8 | 9 | 9 | 6 | ||
| Return on Equity % | 17 | 18 | 33 | 47 | |||||||
| EPS | 1.41 | 1.32 | 1.70 | 1.42 | 0.84 | 0.66 | 0.43 | 0.29 | 0.24 | ||
| EPS Growth % | 7 | -22 | 20 | 71 | 26 | 54 | 48 | 21 | 20 |
Microsoft's projection for 2003: EPS $1.89-1.95, Revenue $32.2-32.6
billion,
Price: $51.23
(Oct 24, 2002)
P/E:
33 (based on EPS $1.54, which is the average
EPS of the last 2 years and Microsoft's projection for 2003)
When stock option and employee stock purchase plans are considered as
compensation cost:
| Years | Jun 02 | Jun 01 | Jun 00 |
| Sales (Bn US$) | 28.37 | 25.30 | 22.96 |
| Operating Income (Bn US$) | 8.27 | 8.34 | 9.11 |
| Net Profit (Bn US$) | 5.36 | 5.08 | 8.17 |
| EPS | 0.98 | 0.91 | 1.48 |
| Gross Margin % | 80 | 85 | 86 |
| Operating Margin % | 29 | 33 | 40 |
| Net Profit Margin % | 19 | 20 | 36 |
Products
Source of Revenue:
| Product Mix | Jul-Sep02 Revenue in m$ | % of Total Revenue | % Change | Jul-Sep01 Revenue
in millions US$ |
% of Total
Revenue |
| Clients (Windows) | 2,851 | 37 | 33 | 2,138 | 35 |
| Server Platforms | 1,587 | 20 | 14 | 1,395 | 23 |
| Information Worker (Office) | 2,273 | 29 | 26 | 1,808 | 30 |
| Business Solution | 106 | 1 | 74 | 1 | |
| MSN | 427 | 6 | 430 | 7 | |
| CE/Mobility | 17 | - | 14 | ||
| Home and Entertainment (X-Box) | 485 | 6 | 267 | 4 | |
| Total Revenue | 7,746 | 100 | 26 | 25,296 | 100 |
Windows
Sales in 2001 was about $8 billion. Windows dominates 97% of
the market. Windows XP was released on Oct 25, 2001.
Office
Sales in 2001 was about $9 billion. It has more than 90% of the
market. The latest Office XP was introduced on May 31, 2001.
Business Servers
Window based server grew 32% in 2000 to $13.9 billion. Unix based
server grew 14% to $ 29 billion.
Microsoft gets more market share from the low end of the server market.
Excerpt from eCompany, May 2001:
>> Most big websites use Oracle's database software running on
Unix servers, particularly Sun's, to sort and store the content and data
requested by thousands of visitors, sometimes all at once.
>> Microsoft does run some industrial strength websites: Nasdaq.com,
Realtor.com and Dell use Microsoft database software - as do, two of the
very biggest sites, MSN and Microsoft.com.
>> The Transaction Processing Performance Council, the widely
accepted arbiter of claims made by competing vendors, ranks 3 Compaq servers
running on Windows 2000 and Microsoft SQL database as 1st, 3rd and 4th
in terms of transaction processing speed.
>> The Unix companies are still better at making big servers
that have to deal with tens of thousands of users simultaneously.
But the edge is going away - some experts expect parity in about a year
or two - and that high volume is of interest to only a relatively small
group of customers.
>> Microsoft software is much, much cheaper. An engineer
at Terra Lycos says an Oracle-on-Sun combination costs about twice as much
as a Windows combo. "But in the Microsoft lab, we've actually gotten
3 times the performance [on XML-based SQL databases] as on Oracle."
MSN
The msn.com portal ranks second in the U.S. behind Yahoo! Hotmail
is the world's most used free e-mail service.
Xbox
The market size of game-console would be about $20 billion. Xbox
was released on Nov 8, 2001 to compete with PlayStation and Nintendo.
Pocket PC
The operating software for handheld devices should grab 19% of the
handheld market by the end of 2001. By 2004, that number could climb
to 36%. (IDC)
Small Business
Small business spend about $19 billion in software each year.
New Products to be Launched
.Net Services
Bill Gates said .Net strategy is "Bet the Company" thing. By
using XML technology, Microsoft aims to turn web sites and software programs
into vitual lego pieces. All the web sites will have the same standard.
They will be able to talk to each other.
GM or Ford will be able to know the inventory at the end of the supply
chain. A consumer can view information from his bank, credit card
company and brokers all at the same time. Besides, he can ask his credit
card company to automatically pull money out of his checking account to
cover his monthly statement. Today he is unable to do so if the different
companies do not cooperate. For a small device user, he could also obtain
the information of what he wants, instead of looking at the entire web
page.
Microsoft managers like to compare XML to a railroad track: It
has a common gauge that everyone can use, but Microsoft will make the best
trains and provide the best tools for other people to make their own trains.
Stinger
Software for cell phones. Stinger trials begin later in 2001
with Vodafone, Telefonica(Spain) and T-Mobile(Germany).
Utimate TV
TV set-top box.
New Products under Development
Tablet PC
Natural Language Processing
Face Mapping
Information Agents
Is it a monopoly-type business?
In operating system, it has always been the sole
leader of the market. It dominates over 90% of the PC market.
Most application software are based on Windows. As a result, nearly
all computer users pay a "fee" to Microsoft for using its Windows.
Linux is another option for the users. Some
products have been introduced by using Linux, but it is still not as popular
as Windows. Linux is developed by volunteers in the web community,
in the long run it is hard to sustain its technological advantages and
compete and catch up with the full time and strongly financed research
team in Microsoft.
In the area of general business applications, Office
also has the largest market share and left its competitors very far behind.
These are the 2 area where most of its revenues
come from.
Is it in a great potential market which could lead to a sizable increase in sales for at least several years? Does it have a strong demand? How big is the market?
Does the management have a determination to continue to develop products that will further increase total sales when the growth potentials of currently attractive product lines have largely been exploited?
What makes the company different from its competitors? How does the company sustain its competitive advantages?
How effective are the company's research and development efforts in relation to its size?
Does the company have an above-average sales organization?
Does the company have worthwhile profit margin?
What is the company doing to maintain or improve profit margin?
Does the company have outstanding labor and personnel relations?
Does the company have outstanding executive relations?
Does the company have depth to its management?
How good are the company's cost analysis and accounting controls?
Does the company have a short-range or long-range outlook in regard to profits?
Will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will dilute existing shares?
Does the management talk freely when things are going well, but "clam up" when troubles and disappointments occur?
Does the company have a management of unquestionable integrity?