Financial Report

Harvard Business School

9-100-027
Rev. February 16, 2000

Microsofts Financial Reporting Strategy
We are a social club known for being conservative.
â€"Greg Maffei, CFO1

On June 30, 1999, during a conference address with analysts, Microsoft Corporation announced
that the fellowship was under investigating by the Securities and convince Commission (SEC) for
certain accounting practices. Although the exact focus of the investigation was not disclosed, the
common belief was that the investigation involved the political partys deferral of revenue and other
undisclosed reserve accounts.2

come with Background3
As the developer and manufacturer of products such as the Windows operating system, the
profit Explorer web browser, and the Microsoft Office suite of applications, Microsoft was easily
the most astray recognized software developer in the world. The companys account had been well
documentedâ€"in articles, books, documentaries and even a made-for-television movie, Pirates of
Silicon Valley. tiptop Gates and Paul Allen founded the company in 1975, with the idea that maven day
there would be a computer on all desk and in every home. The companys big display came in
1980 when it negotiated with IBM to provide the operating system for IBMs new private computer.




The result was MS-DOS and by the mid-80s, Microsoft dominated the market for operating systems.
The company went public on March 13, 1986 at $25.75 per share. As of June 30, 1999, 1 share of
Microsoft purchased at the initial public offering was think of almost $13,000. By this time, the
company also had the highest market value of any U.S. public company (approximately $460 billion)
and its CEO, Bill Gates, was the worlds wealthiest individual.
Since going public in 1986, the companys monetary performance had been nothing short of
extraordinary (see Exhibits 1 and 2). gross and operating income grew an average of 43% and

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