No. of Recommendations: 2
As FoolRM requested, I went ahead and did a quick Rule Maker Ranker analysis for Microsoft using the top
three scoring companies that used MSFT as a competitor: Yahoo! (YHOO), Adobe Systems (ADBE), and
America Online (AOL). Granted, this is definitely a case of stacking the deck against a given company, but
maybe it is about time Microsoft got a taste of its own medicine. Here are the results:
Financial AnalysiCompany Being Evaluated Competitor #1 Competitor #2 Competitor #3
Microsoft Yahoo! Adobe Systems America Online
MSFT YHOO ADBE AOL
Current PeriodYear-ago PerioYear-over-Year Current Period Current PeriodCurrent Period
2000Q2 1999Q2 Growth 1999Q4 1999Q4 2000Q2
Income Statement . . .
Sales 6,112 5,195 17.7% 201 282 1,621
Cost of Goods S 756 788 -4.1% 27 24 830
Net Income 2,486 1,983 25.4% 45 97 271
Shares Outstand 5,538 5,460 1.4%
Balance Sheet . . .
Cash & Equivale 17,843 19,237 -7.2% 872 499 3,053
Current Assets 22,020 21,809 1.0% 946 623 3,816
Short-term Debt 0 0 No Debt 0 0 0
Current Liabili 10,504 7,471 40.6% 192 268 2,162
Long-term Debt 0 980 -100.0% 0 0 1,581
1 1 1
Margins & Ratios . . . Competitors' Average
Gross Margins 87.6% 84.8% 2.8 86.6% 91.5% 48.8% 75.6%
Net Margins 40.7% 38.2% 2.5 22.4% 34.4% 16.7% 24.5%
Cash-to-Debt No Debt! 19.63Eliminated Debt! No Debt! No Debt! 1.93 2.80
Net Cash 17843.0 18257.0 -2.3% 872.0 499.0 1472.0 947.7
Fool Flow Ratio 0.40 0.34 15.5% 0.39 0.46 0.35 0.40
Continue Here
Ranking Rule Makers
1) Brand Points (0-1) 3) Financial Dire Points (0-3)
Familiarity 1 Sales Growth 3
Openness 1 Gross Margins 3
Optimism 1 Net Margins 3
Legitimacy 1 Shares Outstandin 2
Inevitability 1 Cash-to-Debt 3
Solitariness 1 Fool Flow Ratio 0
Humor 1 Expansion Potenti 2
Subtotal 7 Subtotal 16
2) Financial Loca Points (0-2) 4) Monopoly Statu Points (0-4)
Mass Market Habit 0 Gross Margins 4
Gross Margins 2 Net Margins 4
Net Margins 2 Net Cash 4
Cash-to-Debt 2 Fool Flow Ratio 2
Fool Flow Ratio 2 Convenience 2
Your Interest 2 Subtotal 16
Subtotal 10
5) Your Enjoymen 1
Total Score 50 TopTier!
Overall, not a bad score given the competition. I altered a couple of the values that some of the
previous posters had used, docking Microsoft a point in "Expansion Potential" and two points in
"Convenience". Why did I do this? Namely because of the negative image that so many people have of
Microsoft and its products. I believe this is one reason why their is all this interest around both
Linux and Sun's StarOffice suite, in that they both provide an alternative to Microsoft's near monopoly in
operating systems and office productivity software. Also, I didn't give them any points for Mass Market
Habit, since most users of their products will only be purchasing something from them every few years or so.
Microsoft does have products that have a monthly repeat purchase model like MSN internet access, but
that is such a small portion of their business I didn't feel right giving them two whole points on that
account.
Even with those changes, MSFT still maintains a top tier ranking ... pretty impressive if you asked me.
Fool On!
the LanceMan
