Perhaps the most telling indicator of the intense competition Microsoft faces in an industry it once dominated is that my search for Microsoft’s financial statements took me to their listing Google Finance’s page where I could peruse their financial expectations.
A spate of articles bemoaning the cyclical nature of King of the Mountain in American industry will undoubtedly follow today’s news that Microsoft will lay off 18,000 employees–about twice as many as Wall Street pundits previously projected. You’ll undoubtedly read about the railroad barons giving way to Edison’s Bell Labs before technology from wars made Detroit rich. The technology leaped to offices, giving way to AT&T, Xerox, IBM and now our very own Microsoft.
Weep not for Redmond, friends. Microsoft will be just fine for quite some time. Its strategic miscalculations are famous: not struggling a nascent Apple struggling to stay alive at 5% market share, the ugly mismanagement of its antitrust war with the government and its failure to put an Internet-capable device in every home during the holiday season of 1991 when Google co-founder Larry Page was otherwise occupied getting ready for the Senior Winter Dance at East Lansing High School.
Forget the Money Talk about Microsoft
We all have a piggy bank we use for rainy days. Microsoft has kept about $5 billion in its piggy bank for years. Sure, they took on debt this year, like maybe you did if you managed to get a home equity line. But they used to buy one of the world’s top cellphone manufacturers. If you not so coincidentally subtract Microsoft’s debt from its purchase price of Nokia, you end up with about $5 billion.
If your great uncle Edmund gave you 100 shares of Microsoft, that’s a nice little evening out every few months because the stock earns about $2.60 per share. Over the last four years, while Microsoft the butt of Zune jokes, Google destroying Bing in the search world and continuing to give life support to Windows Phone, the company earned $78 billion.
The earnings from Microsoft’s last four years would allow you to buy 20% of Google’s stock.
High finance isn’t played like fantasy football, but the bottom line is that Microsoft will be around for a long time.
The company still has 80,000 employees, and for now, the company’s operating system still runs the world. Until some company can make an Excel equivalent that pleases CFOs, the company’s Office product will stick around.
Your takeaway as a small business leader is to ensure that the financial ratios expected by the members of your Board, by yourself and the plan you’ve written and by any lenders remains consistent. The bigger takeaway is to have a contingency plan for big events to keep your finances consistent.
What happens if you lose your best sales rep? What if a new competitor opens? What if a key executive gets sick, or heaven forbid, dies?
Assume one of these things happens in the second half of 2014. What will you do to ensure 2015 is consistent with the financial plan stakeholders expect from your organization?