Washington, D.C., October 7, 1998: Microsoft's anticompetitive business practices and abusive pricing of computer software have already cost the public hundreds of millions of dollars in excess charges and are threatening to inhibit development of the Internet, a report released today by the Consumer Federation of America (CFA) and the Media Access Project (MAP) charged.Pointing to the disturbing findings of the report, entitled The Consumer Case AgainstMicrosoft, CFA and MAP were joined by Consumers Union (CU) and The Consumer Project onTechnology (CPT) in a letter that urged Congress to engage in vigorous oversight and, if necessary, consider legislation that would promote greater competition in the computer software industry.
I didn't begin to suspect Microsoft's strong-armed business practices until I took a job with a computer manufacturer. Does anybody remember Microsoft Bob? MS Bob was a cartoonish front end for Window 3.1 designed to make computers less threatening to children and the technologically bewildered. (They've used the same interface for that annoying talking paperclip on the new version of MS Office.) It was bloated and buggy. Engineering hated it for all the problems it created when we installed it. At the same time, Sales pushed Bob to customers like it was grain in a North Korean grocery store. "Why?" I asked. I was told that if we didn't sell X number of Bob, we wouldn't get the best price on some new earth-shattering OS that was coming. That OS was Chicago, a.k.a. Windows 95.
NVIDIA SURPRISED Wall Street by saying that its second quarter sales dropped by nearly $173 million compared to the first quarter, causing its share price to slump on Wall Street.Innovation?Earlier, Nvidia had expected its sales to rise or break even in its second quarter, the official figures for which won't be published for a week or two.
CEO Jen Shun Huang said that the second quarter was bad for sales of PCs, with a 13 per cent drop compared to the first quarter.
But he appeared to blame most of the problems on a fall in stock of chips it won't sell, because, he claimed, Microsoft changed security codes on Xbox machines and chips already manufactured won't work with the new codes.
Nvidia therefore had to write off these chips.
The price you pay (how consumers are harmed)
Microsoft bullies consumers and corporate partners
So there you have it. $3.1 billion from a tax loophole, $1.3 billion from its employees, and $0.7 billion from put warrants combine to give Microsoft over $5 billion from its own stock in fiscal 1999. And it avoided paying $9 billion in wages. All that from a company that only had $7.8 billion in net income. And as long as the stock keeps going up, they can keep doing that ad infinitum.
Current accounting rules permit a significant amount of compensation expense to be completely hidden from reported financial statements. This accounting loophole is one of the reasons that options programs have proliferated and become so generous. It also partially explains why reported earnings quality has deteriorated over the years.
After all the bragging and all the hype, inserted innocently under the "Business Outlook" section, was the revelation --offered with utterly no explanation -- that the upcoming quarter was going to be a disaster -- an EPS miss of six cents below the Street's expectations, and lower than expected revenues, too. And P.S. -- your cat is dead.
