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ZDNet: The Coming Crash in Microsoft’s Stock

“[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.”

Complete
Story