Financial analysis of Microsoft

Résumé du document

Microsoft, a global company in the informatics system, was founded in 1975 by two American students, Bill Gates and Paul Allen. Microsoft hires almost 80000 people in more than 100 countries. Its most important activity is to develop informatics system for computers with revenues worth 70 billion dollars and net profit almost 24 billion dollars in 2011. The corporate headquarters is in Redmond, near Seattle, USA. At the beginning, the first objective of Microsoft was to equip each family with a personal computer. Now, this objective is almost accomplished with 94% of personal computers working with Windows. However, Microsoft integrates into other domains like television with the American private channel MSNBC, social network, keyboard and entertainment products like Xbox and Zune.

In 1980, IBM outsourced to Microsoft the operating system of its PC (launch of MS-DOS). 1985 witnessed the launch of Microsoft 1.0 but it was a failure because of insufficient demand. The first commercial success was in 1990 with Windows 3.0, then 95, 98, NT, XP… it was in 1986 after its introduction in the stock exchange that Microsoft became a famous global company. In 1996, Microsoft launched Internet Explorer. This browser was still used with explorer 8. It was a revolution for everybody because it was really useful. Then, Microsoft wanted to develop an activity in the video games market and decided to launch the Xbox in 2001 and the Xbox360 in 2005. These games console have market share of 26% and are still practiced by people from all around the world. In another way, Microsoft launched in 2006 the Zune MP3 player; however, it was not a success because Apple had captured most of the market share and garnered much popularity with iPod and iTunes. In 2007, the company experienced resounding success with the introduction of Vista and Office 2007. The following year, the company launched a takeover bid for Yahoo but it proved to be a failure.

Extraits

[...] It means that IBM's resources are used worse than Microsoft's resources. Autonomy ratio Equity capital / total of liabilities * 100 = The autonomy ratio of IBM is lower than 50%. It means that the company has not a sufficient financial autonomy contrary to its competitors . Page 23 sur 30 Turnover Ratios Asset Turnover : Total Revenue / Total Assets = IBM has an asset turnover of 0,88 which is higher than Microsoft. The company has a greater operational efficiency. [...]

[...] It means that it is a solvent company. Liquidity Ratios Current Ratio: Current Assets / Current Liabilities = Acid Test: (current asset-inventories) / Current Liabilities = Cash Levels : - (Cash + Near Cash Assets) / Current Assets = - Days Cash: (Cash / Sales) x 360 = The current ratios and the acid test are much lower than the Microsoft's ratios. It means that Apple relies on realization of inventories to cover it short-term liabilities but to a lesser extent compared to Microsoft. [...]

[...] Net Cash flow from operating Net Cash flow from operating 2011 Cash flow from investing activities: Capital expenditures Investments Other Cash Flow from investing activities Net Cash used in investing ( 000) ( 000) ( 000) ( 000) ( 000) ( 000) ( 000) ( 000) ( 000) ( 000) ( 000) The cash flow from investing activities represents the acquisition of companies, the investments. Microsoft adopted in 2008 an investing politic in order to cope with the financial crisis on the one hand, and on the other hand with the massive evolution of Apple. Firstly the company has kept increasing its capital expenditure to add properties and equipments to its. [...]

[...] The asset turnover is quite high, meaning that a low amount of asset resources is needed to achieve more sales. By comparison, Apple and IBM, the major competitors, have an asset turnover of 0,88 and 0,93, which are higher: Apple and IBM have a greater operational efficiency. Integrated Analysis Operational Leverage: ROS x Asset Turnover = 33% x 0,64 = Financial Leverage: ROA x Asset Leverage = 21% x 1,90 = The integrated analysis shows that Microsoft has low multipliers. [...]

[...] It was a revolution for everybody because it was really useful. Then, Microsoft wanted to develop an activity in video games market and decided to launch the Xbox in 2001 and the Xbox360 in 2005. These games console have market share of 26% and are still practiced by people from all around the world. In another way, Microsoft launched in 2006 the Zune MP3 player. It was not a success because Apple has almost all the market share and a big notoriety with Ipod and Itunes. [...]