[NTLUG:Discuss] How much truth is in this piece?

[Christopher Browne]

On Thu, 04 Nov 1999 20:26:21 CST, the world broke into rejoicing as
"Pete. Koren" <pkoren at hex.zap-this.net>  said:
> A former coworker sent me this URL, which claims
> that Microsoft is committing financial fraud on a
> spectacular scale. Has anyone heard any
> corroborating evidence?
> 
> 	http://www.billparish.com/msftfraudfacts.html

Take this with *big* grains of salt.

a) The provable factor is that MSFT has issued lots of stock options
to employees.  There's *some* controversy over this; the same is true
for practically *all* large corporations that issue stock/option
incentives.

b) FASB (Financial Accounting Standards Board) has been mulling over a
way of treating the values of options as income/expense for financial
statement purposes; the big claim the above web page makes is that MSFT
would be "losing lots of money" were this treatment to be used.

However, the options *don't involve cash* and thus the phrase "losing
money" isn't really the right term to use.

c) At the end of the day, anyone that is capable of reading financial
statements, and in particular:

  - Recognizing the line that reads "Fully diluted share capital"
  - Reading the portion entitled something like "Statement of Changes
    in Financial Position"

will have the wherewithal to factor out these effects.

That being said, knowing those two things does require some sophistication
in "accounting knowledge," and a layman without a degree in accounting
could be forgiven for not being able to grapple with them.

Fortunately, there are a *LOT* of analysts out there with MBAs in
finance, and *their* behaviour on the stock market can help expose the
net effects by influencing pricing.

Some of the political stuff *might* be valid; leaping to the use of the
page name "msftfraudfacts.html" is, however, rather a big leap.  If MSFT
decided to pursue the guy for slander, whilst we might not be happy with
MSFT, he's certainly given some material for them to pursue over...
--
"The only ``intuitive'' interface is the nipple. After that, it's all
learned."  -- Bruce Ediger, bediger at teal.csn.org on X interfaces.
cbbrowne at hex.net- <http://www.ntlug.org/~cbbrowne/lsf.html>