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ZDNet: The Coming Crash in Microsoft's Stock

Sep 16, 1999, 19:24 (8 Talkback[s])
(Other stories by Jesse Berst)

"[Forget the Linux threat,] ...two obscure accounting rules... could undermine Microsoft's financial foundations."

"THE FIRST PROBLEM
The success of high-tech companies is built on stock options. Those options make it possible to attract and retain the best and brightest... The Financial Accounting Standards Board may soon change the rules on options. Right now, companies must report employee salaries and benefits as expenses. But they don't have to do the same with employee options."

"London-based research firm Smithers & Co determined that Microsoft would have lost more than $15 billion in fiscal 1997 if the new rules had been in effect. ...Now I ask you, what would happen to Microsoft's stock if it suddenly reported a massive loss, instead of the profits everyone expects?"

"[SECOND PROBLEM]
For years, commentator Mark Anderson has warned of Microsoft's 'cookie jar' accounting. The president and editor of Strategic News Service, an esteemed insiders newsletter, he claims 'Microsoft has so much money socked away that they can produce any financial results they want to...' "

"...the Securities and Exchange Commission... finally began an investigation this summer. ...what happens if the SEC forces Microsoft to restate its earnings? Even if those new earnings turn out to be higher in some cases, it will cast doubt on the company's integrity -- on the heels of similar suspicions arising from the antitrust trial."

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