Microsoft stung by $3 billion tax bill
Microsoft is taking financial hits from more than just the economy. Its latest financial reports show it stumped up $3.1 billion to settle a tax debt last year, while there are claims the ongoing ‘Vista Capable’ case could cost millions.
The tax payment, made sometime between July and September, is part of a settlement agreed with the IRS after an audit covering 2000 to 2003. It doesn’t appear the payment will have affected the figures Microsoft gives for revenue and profits; instead it’s listed separately and affects the numbers for cashflow.
To put the figure into context:
- Microsoft’s reported profit for the last three quarter was $4.17 billion, so the tax payment could be the equivalent of somewhere in the region of a fifth of annual profits.
- $3.1 billion is, by coincidence, the same amount lost by Microsoft’s online services division over the past three years.
- It’s just over double the projected annual savings from the newly-announced 5,000 job cuts and associated cutbacks on expenses.
The good news is that this was an expense Microsoft will have known about and been able to budget for in advance. The same can’t be said about any penalties it could face if it loses the ongoing ‘Vista Capable’ dispute – but the first specific estimates are now available.
An economist giving evidence for the case against Microsoft says that, were it to lose, the firm might have to pay as much as $8.5 billion to rectify its actions.
The figures assume the court agrees with the argument that machines which could only run the Home Basic Edition were misleadingly marketed as ‘Vista Capable’. If ordered to pay to upgrade all these machines to be capable of running all editions of Vista, Microsoft would have to pay an estimated $155 per desktop. The cost for laptops could be anywhere from $245 to $590 depending on their set-up.
Microsoft says that even if it loses the case, this model of compensation would be unfair because it would give a free upgrade to many users who would never have paid the extra costs for a machine which could run Vista’s Premium editions.
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January 27th, 2009
“An economist giving evidence for the case against Microsoft says that, were it to lose, the firm might have to pay as much as $8.5 billion to rectify its actions.”
It doesn’t matter, because Microsoft has several gazillion dollars in the bank, and isn’t bound by the laws of economics or anything mundane like that, and it has a monopoly happening since it controls 347% of the market, and Microsoft can never die even if you drive a stake through its heart! Obama should rein in his judicial and IRS boys, otherwise Microsoft will drive them out of business – tip them right into the “death spiral” – and then they’ll take over the U.S. government and it’ll be much better, because Bill knows best and is really benevolent, and only wants recalcitrants to have the software that’s really, truly best for them.