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Analysis and Valuation Project
Thu Pham Tucker Hess Tung Do Uriel Ramirez
TABLE OF CONTENTS
MICROSOFT ANALYSIS A PART 1: COMPANY DESCRIPTION AND BACKGROUBUSINESS SUMMARY DOMESTIC AND FOREIGN MARKETS BUSINESS RISKS AND OUTSTANDING
PART 2: BUSINESS MODEL SWOT ANALYSIS REVENUE DRIVERS EXPENSE DRIVERS PART 3: RECENT FINANCIAL PERFORMANC PART 4: PEER GROUP ANALYSISCOMPARATIVE DATA PORTER’S FIVE FORCES RATIO ANALYSIS PART 5: FUTURE PERFORMANCE ANALYSISLIST OF ASSUMPTIONS PROJECTING FINANCIAL STATEMENTS
PART 6: WEIGHTED AVERAGE COSWACC FORMULA MSFT WACC CALCULATION CAPITAL STRUCTURE ANALYSIS PART 7: COMMON SHARES VALUATIONFREE CASH FLOW TO EQUITY DIVIDEND DISCOUNT MODEL DISCOUNTED CASH FLOW INTRINSIC VALUE PE RATIO PART 8: CONCLUSION AND RECOMMENDATION PART 9: TABLES AND SPREADSHEETSHISTORICAL FINANCIAL STATEMENTS
FORECAST OF FUTURE FINANCIAL STATEMENTS
EARNINGS PER SHARE
PART 10: BIBLIOGRAPHY
MICROSOFT ANALYSIS AND VALUATION PROJECT
RIPTION AND BACKGROUND
UTSTANDING LITIGATION
FINANCIAL PERFORMANCE ANALYSIS
NALYSIS
RMANCE ANALYSIS
TATEMENTS
WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS
S VALUATION
ND RECOMMENDATION
PREADSHEETS TATEMENTS
TATEMENTS
ND VALUATION PROJECT
1 1
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4 4
5 5
6
7 7
7 8
9 9
9
10 10
10 11
13 13 14
14 15
15
16
17 17
20
24
25
PART 1: COMPANY DESCRIPTION AND BACKGROUND
MICROSOFT ANALYSIS AND VALUATION PROJECT | 1
COMPANY DESCRIPTION AND BACKGROUND
Business Summary Founded in 1975, Microsoft Corporation develops, licenses, markets, and supports software, services, and devices worldwide, and is based in Redmond, Washington. The company is comprised of the following segments:
Company Microsoft Sector Business Software
and Services Industry Computer Software
and Hardware Ticker MSFT Exchange NASDAQ Price $41.42 52 Week Low $38.51 52 Week High $50.04 Market Cap 340.70B Shares 8.20B Beta 1.08 P/E 16.71 EPS 2.63
• Devices and Consumer (D&C) Licensing Segment: licenses Windows operating system and related software; Microsoft Office for consumers; and Windows Phone operating system.
• Computing and Gaming Hardware segment: provides Xbox gaming and entertainment consoles and accessories.
• Phone Hardware segment: produces Lumia Smartphones and other non-‐Lumia phones.
• D&C Other segment: provides Windows Store, Xbox Live transactions, and Windows Phone Store; search advertising; display advertising.
• Commercial Licensing segments: licenses server products, including Windows Server, Microsoft SQL Server, and Visual Studio.
Microsoft markets and allocates its products through original equipment manufacturers, distributors, resellers, and online retailers. Domestic and Foreign Markets In FY 2014, Microsoft’s revenue was $86.8 billion in total. Revenue generated from foreign countries accounts for 49.9% while revenue generated domestically is 50.1%.
PART 1: COMPANY DESCRIPTION AND BACKGROUND
MICROSOFT ANALYSIS AND VALUATION PROJECT | 2
Assets: $40.1B Nearly half of the company assets are located in the United States (44.0%), while the rest in Finland (24.5%), Luxembourg (17.2%), and other countries (14.2%).
Business Risks and Outstanding Litigation
• Execution and competitive risks brought by the cloud-‐based computing model. Microsoft is in its transition to a computing environment to provide cloud-‐based services for smart devices. The company has to invest a huge amount of resources in software development and infrastructure, while its competitors are also rapidly developing and delivering these services to customers. This might decrease the revenues and operating margins that have been previously achieved. In addition, it is still uncertain whether the strategies used could successfully attract customers or generate required revenue.
PART 1: COMPANY DESCRIPTION AND BACKGROUND
MICROSOFT ANALYSIS AND VALUATION PROJECT | 3
• Intense competition Microsoft faces intense competition across all markets for its products services, with competitors range from Fortune 100 companies to small businesses. Software vendors are devoting enormous efforts to building software that mimics the features of Microsoft products and even violates its intellectual property rights and then sell at little to no cost. In response to competition, Microsoft continues to develop its products with basic functions and sell them at lower prices than the standard versions. These competitive pressures can reduce sales volume, price, and increase operating costs, which would decrease margins and revenues.
• Intellectual property rights Protecting intellectual property rights globally, especially in countries where laws are less protective of these rights, is challenging and Microsoft might now be able to adequately do this. As a result, this problem will decrease revenue in those countries and hence, negatively affect Microsoft’s revenue in total. In addition, the company needs to spend more money and efforts to educate customers and lawmakers about the benefits of promoting licensing products.
• Security vulnerabilities Hackers might develop viruses that attack Microsoft products, networks, and data centers. Even though this is an industry-‐wide problem, Microsoft endures the highest risk since it is one of the most popular operating systems. The company might also experience outages and data losses if it fails to implement an adequate operations infrastructure.
PART 2: BUSINESS MODEL
MICROSOFT ANALYSIS AND VALUATION PROJECT | 4
BUSINESS MODEL
SWOT Analysis
Strengths – Brand loyalty and reputation: globally, Microsoft has always been the most popular OS and software provider and accounts for over 90% of market share. – Simple software: Microsoft products are easy to use and still maintain great quality. – Strong distribution channels: Microsoft works with all major computer hardware producers and computer retailers to sell pre-‐installed Windows software computers. – Acquisition of Skype: With 300 million users, Skype boosts Microsoft’s online presence and advertising. – Strong hinancial performance: Increased revenue and a large amount of cash to use for investments and acquisitions.
Weaknesses – Poor investments and acquisitions: Many acquisitions made by Microsoft soon fail and shut down; very few are successful. – Security hlaws: Window OS is the least protected against virus attacks compared to other OS. – Mature PC and mobile markets: Microsoft only entered these sectors recently and thus, will grow revenues at a slower rate than its competitors. – Slow to innovate: The company spends many resources on R&D for innovative products, but for the most part has failed in this area.
Opportunities – Cloud based services: Microsoft has the resources needed to develop and expand its cloud computing system for the increasing demand. – Mobile industry: Smartphones and tablets markets are growing fast, Microsoft can utilize this opportunity to develop its devices and mobile OS. – Acquisitions: With a huge amount of cash, the company can invest and acquire startups to grow bigger.
Threats – Intense competition: Microsoft is facing many competitors such as Google and Apple in both PC and mobile OS. – Change in customers habits: Customers are shifting to mobile markets, in which Microsoft just enters recently. – Lawsuits: Microsoft has been sued and lost in some large cases, which are expensive. If the company does not come up with solutions in a timely manner, there will be more to come.
PART 2: BUSINESS MODEL
MICROSOFT ANALYSIS AND VALUATION PROJECT | 5
Revenue Drivers
Microsoft’s revenue is increasing and reaches $86.8 billion in FY 2014. Commercial Licensing accounts for the largest proportion, which accounts for 48.2%; followed by D&C Licensing (21.6%), D&C Computing and Gaming hardware (11%), Commercial other (8.8%). D&C – Phone hardware segment is still new and accounts for only 2.3% of the total revenue. Expense Drivers Most of the company expenses are on Cost of Goods Sold (31%), Selling and Administrative (23.8%), and R&D (13.1%). Although revenue growth continues to increase over the past years, gross margin is gradually decreasing from 80.2% in 2010 and reaches 69% in 2014. This trend is the same for profitability ratios.
PART 3: RECENT FINANCIAL PERFORMANCE ANALYSIS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 6
RECENT FINANCIAL PERFORMANCE ANALYSIS
• Microsoft’s growth rates over the last ten years have fluctuated tremendously. The last five years have not seen a great change either, and it is due to new products and the emphasis that the company puts in the particular sales. An example would be the sales of their Surface tablets, which sales have had an increase of 24% to hit $1.1B in the most recent quarter while PC sales have declined.
• Although revenues have increased,
even with the constantly changing growth rates over the last several years, their gross profit has steadily decreased for the past five years and the likelihood of that trend continuing is high because their costs continue to rise with new developments more than their revenues.
• Microsoft’s acquirement of Nokia’s
Cellphone division was a $243M expense. They will attempt to have a greater impact in the development as their Windows phones have drastically lagged the competition from Samsung, Apple, and other cellphone giants. These higher initial costs cause Microsoft’s profit to decline year over year.
• Long Term debt has more than
quadrupled from 2010 to 2014. In 2014 alone there was a 63.84% increase from the year before. This could be because Microsoft is taking advantage of low interest rates to become more leveraged. They could also be trying to reach their optimal capital structure by doing so.
-‐5%
0%
5%
10%
15%
20%
25%
2004 2006 2008 2010 2012 2014 2016
Growth Over Prior Year
68.00%
70.00%
72.00%
74.00%
76.00%
78.00%
80.00%
82.00%
2009 2010 2011 2012 2013 2014 2015
Gross ProRit
0
5000
10000
15000
20000
25000
2009 2010 2011 2012 2013 2014 2015
Long Term Debt
PART 4: PEER GROUP ANALYSIS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 7
PEER GROUP ANALYSIS Comparative Data Microsoft started out with software and is still the leading OS and software provider. Microsoft is extremely popular for its Microsoft Office products and doesn’t seem to have any big competitors, besides possibly Google Docs. Once Microsoft further develops its cloud computing system, it will be in a better position. What differentiates Microsoft is that its products are simple and easy to use. Together with its long history of Commercial Licensing, D&C Licensing, and D&C Computing and Gaming hardware, the company has successfully built up its brand loyalty and reputation. Porter’s Five Forces
Industry Rivalry: Moderate
Threat of entrants: Low Microsoft has the majority share of operating systems now and it can take years and many resources for an
entrant to build a successful OS.
Bargaining power of Buyers:
Moderate In the PC
segment, the power is low. However, in the game and mobile segments, the power is
relatively high. Threat of substitute: Moderate Threat of
substiture for Windows is low; threat of substitute for the gaming segment is high with two potential players Sony and
Nintendo.
Bargaining power of
Suppliers: Low Resoucres that Microsoft needs are available from a large
number of hirms.
PART 4: PEER GROUP ANALYSIS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 8
Ratio Analysis Competitors in:
• Operating systems: Oracle • Internet services: Google • Entertainment and devices: Sony
• Microsoft’s total asset turnover (0.6) is somewhat higher than the industry average, indicating that its ability to manage assets is rather effective. This is also similar to the situation of return on assets ratio
• The company’s liquidity is in a good shape, with the current ratio not too low and not too high; total debt/equity is 25.9%, lower than Oracle (51%) and Sony (34.1%).
• Profit margin has been decreasing over the past five years and was 4% in 2014. Compared to Google and Sony, the growth is rather slow. This indicates negative trends in the company’s earnings such as bad acquisitions and investments.
10.9
0.4 3.3
51
3.2
8.7
0.5 4.8
7.7
21.4
0.6 0.5 0.9
34.1
20
11.1
0.6 2.5
25.9
4
Prohitability -‐ Return on Assets %
Total Asset Turnover
S-‐T Liquidity -‐ Current Ratio
L-‐T Liquidity -‐ Total Debt/Equity (%)
Growth -‐ Gross Prohit (%)
Peer Analysis (2014) Oracle Google Sony Microsoft
PART 5: FUTURE PERFORMANCE ANALYSIS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 9
FUTURE PERFORMANCE ANALYSIS List of Assumptions
Profit margin from 2014 will be maintained for the next 5 years Interest will be paid at same rate as 2014 for the next 5 years EBIT margin will be kept for next 5 years Effective tax rate for Microsoft will be kept at 21.03% Dividend payout will remain at 40.22% for 5 years SG&A and R&D will grow at the percentage of sales from 2014 for 5 years All other non-‐operating items will grow at the percentage of sales from 2014 for 5
years Short Term Investments will grow at same rate from 2014 Accounts Receivables/Sales ratio will be used for the next 5 years Inventory and other CA/Sales ratio will be used for the next 5 years Gross fixed assets will be kept at same rate for next 5 years Quick ratio will be used for the next 5 years Debt/Equity ratio will be used for the next 5 years
Projecting Financial Statements
Microsoft growth rate has been fluctuating between 5.4% and 12% for the past five years, leaving the average growth rate at 8.26%. Having these various growth rates, we used the average of 8.26% for 2015 and lowered it to 4.99% for 2016 due to past trends. After that, growth rate will increase and decrease for 2017, 2018, and 2019 to 6.65%, 4.53%, and 5.06% respectively. Every line item on Microsoft’s financials have fluctuated at different rates just like the sales growth for the past five years due to changing ideas and products introduced. However, with respect to the forecast, line items were increased using the percent of sales method.
PART 6: WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 10
WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS Weighted Average Cost of Capital Formula
𝑊𝐴𝐶𝐶 = 𝑟!× 1− 𝑇! ×𝐷𝑉 + 𝑟!×
𝐸𝑉
Where: • rD = cost of debt • TC = corporate tax rate • E = market value of the firm’s equity • D = market value of the firm’s debt • V = E + D • D/V = percentage of financing that is debt • rE = cost of equity • E/V = percentage of financing that is equity
MSFT WACC Calculation Effective Tax Rate Tc = 21.03% Market Value of Firm’s Equity (In Millions) Market Capitalization is used for common equity weighting: Market Cap = 340,703.2 Market Value of Firm’s Debt (In Millions) 2013 2014 Short Term Debt 2,999 2,000 Long Term Debt 12,601 20,645 Average Short Term Debt = (2,999 + 2,000)/2 = 2499.5 Average Long Term Debt = (12,601 + 20,645)/2 = 16,623.0 Total Book Value of Debt = 16,623 + 2499.5 = 19,122.5 Weight of Equity and Weight of Debt E/V = 340,703.2/(340,703.2 + 19,122.5) = 0.947 D/V = 19,122.5/(340,703.2 + 19,122.5) = 0.053 Cost of Equity Capital Asset Pricing Model (CAPM) Formula: Cost of Equity = Risk Free Rate + Beta * (Expected Return on Market – Risk Free Rate) Risk Free Rate: 1.92% Beta: 1.08 Expected Return on Market: 10% rE = 1.92% + 1.08 * (10% – 1.92%) = 10.65%
PART 6: WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 11
Cost of Debt 2014 Interest Expense: 597.0 Total Book Value of Debt: 19,122.5 rD = 597.0/19,122.5 = 3.12% MSFT WACC
𝑊𝐴𝐶𝐶 = 𝑟!× 1− 𝑇! ×𝐷𝑉 + 𝑟!×
𝐸𝑉
𝑊𝐴𝐶𝐶 = 3.12%× 1− 21.03% × 0.053 + 10.65%× 0.947 = 10.21% WACC Comparison
Microsoft’s WACC is well among its competitors. Therefore, its ability to accept or reject a new project will likely be in the same league with the industry average.
Google Microsoft Apple Oracle WACC 9.90% 10.21% 10.08% 11.88%
Capital Structure Analysis
Google Microsoft Apple Oracle Total Common
Equity 92.90% 79.50% 76% 65.50%
Total Debt 7.10% 20.50% 24% 33.80% Total Minority
Interest 0.80%
0.00%
5.00%
10.00%
15.00%
20.00%
Google Apple Microsoft Oracle
WACC
WACC
PART 6: WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 12
Within the group of competitors, Google and Microsoft have the lowest percentage
of debt in the capital structure (7.10% and 20.5% respectively). Keeping the percentage of debt low means that the firm is paying a lot of attention to keeping financing activities under control. It also shows that the firm is not making the best out of its capital power. The weight of debt (20.5%) is way under the optimal capital structure of 30% debt, and thus makes MSFT’s capital structure rely a lot on equity. To be specific, a change in stock market price will most likely make the capital fluctuate more than it should do for other competitors.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Google Microsoft Apple Oracle
Total Minority Interest
Total Debt
Total Common Equity
PART 7: COMMON SHARES VALUATION
MICROSOFT ANALYSIS AND VALUATION PROJECT | 13
COMMON SHARES VALUATION Free Cash Flow to Equity Fiscal Year 2010 2011 2012 2013 2014 Net Income $18,760.00 $23,150.00 $16,978.00 $21,863.00 $22,074.00 Depreciation and Amortization $2,507.00 $2,537.00 $2,758.00 $3,339.00 $4,245.00 Cap Ex $1,977.00 $2,355.00 $2,305.00 $4,257.00 $5,485.00 NWC (Current Year) $29,529.00 $46,144.00 $52,396.00 $64,049.00 $68,621.00 NWC (Previous Year) $22,246.00 $29,529.00 $46,144.00 $52,396.00 $64,049.00 Change In NWC $7,283.00 $16,615.00 $6,252.00 $11,653.00 $4,572.00 Net Debt (Current) $30,405.00 $38,233.00 $49,269.00 $59,924.00 $61,726.00 Net Debt (Previous) $22,335.00 $30,405.00 $38,233.00 $49,269.00 $59,924.00 Change In Net Debt $8,070.00 $7,828.00 $11,036.00 $10,655.00 $1,802.00 FCFE $20,077.00 $14,545.00 $22,215.00 $19,947.00 $18,064.00 # Of Shares Outstanding 8,668 8376 8381 8328 8239 FCFE Per Share: 2.316 1.737 2.651 2.395 2.192 Discounted Cash Flow
Free Cash Flow To Equity Cost Of Capital 10.21%
Year Growth Rate FCFE Terminal Price Cash Flow 2014 2.192499 2.192499 2015 8.26% 2.373599515 2.373600 2016 5% 2.49227949 2.492279 2017 6.65% 2.658016076 2.658016 2018 5% 2.778424205 2.778424 2019 5.06% 2.919012469 45.02500605 2.919012 2020 3.50% 3.021177906
Vcs $36.07 FCFE
PART 7: COMMON SHARES VALUATION
MICROSOFT ANALYSIS AND VALUATION PROJECT | 14
Dividend Discount Model 2014
Dividends Paid (Millions) $8,879.00 Shares Outstanding
(Millions) 8239 Dividend Per Share $1.08 Required Return 10.21%
Year Growth Dividend
Terminal Price Cash Flow
2014 1.08 1.08 2015 8.26% 1.169208 1.169208 2016 4.99% 1.227551479 1.227551479 2017 6.65% 1.309183653 1.309183653 2018 4.53% 1.368489672 1.368489672 2019 5.06% 1.437735249 22.17669125 23.6144265 2020 3.50% 1.488055983
Vcs $17.77 DDM Discounted Cash Flow
Cost Of Capital 10.21%
Year 2014 2015 2016 2017 2018 2019 EBIT $28,586.00 $30,189.00 $31,696.00 $33,772.00 $35,302.00 $37,088.00 Less Tax $(5,746.00) $(6,348.75) $(6,665.67) $(7,102.25) $(7,424.01) $(7,799.61) NOPAT $22,840.00 $23,840.25 $25,030.33 $26,669.75 $27,877.99 $29,288.39 NOWC $68,621.00 $74,289.00 $77,996.00 $83,105.00 $86,870.00 $91,265.00 TNOWC $81,632.00 $88,375.00 $92,785.00 $98,862.00 $103,341.00 $108,569.00 NIOC $(7,592.00) $(6,743.00) $(4,410.00) $(6,077.00) $(4,479.00) $(5,228.00) FCF $15,248.00 $17,097.25 $20,620.33 $20,592.75 $23,398.99 $24,060.39 NWC (2013) $64,049.00 NFA (2013) $9,991.00
$10.33 FCF
TOWC (2013) $74,040.00 ROIC 27.98% EVA $14,505.37 $23,840.25 $25,030.33 $26,669.75 $27,877.99 $29,288.39
PART 7: COMMON SHARES VALUATION
MICROSOFT ANALYSIS AND VALUATION PROJECT | 15
Intrinsic Value Valuation Method Intrinsic Value Calculation Weight FCFE $36.07 70% DDM $17.77 20% FCF $10.33 10% Target Price $29.84 Price Earnings Ratio
Market Comparison P/E (TTM)
P/E (Forward 12 Months) PEG
1 Year EPS Growth
5 Year EPS Growth
Microsoft Corp 16.8 15.9 2.3 1.82% 10.17% Software & IT Services Industry 74.8 4.7 5.9 13.00% 22.25% Technology Sector 50.4 11.8 4.1 35.29% 24.13% S&P 500 19.7 17.7 4.1 2.34% 15.98% Microsoft's PE ratio is one of the lowest of any stock in the Software & IT Services industry. This could mean that investors have not been willing to pay a premium for the company's business prospects. During the past year, earnings growth has lagged behind its historical five-‐year growth rate, most likely due to decreasing margins.
PART 8: CONCLUSION AND RECOMMENDATION
MICROSOFT ANALYSIS AND VALUATION PROJECT | 16
CONCLUSION AND RECOMMENDATION FCFE, FCF, and DDM models, weighted at 70%, 20%, and 10% respectively, are utilized to estimate the intrinsic value of Microsoft’s stock price. Because of heavy fluctuation in the growth of free cash flow, FCF cannot be relied on, and thus was weighted at 10%. In addition, DDM was only weighted at 20% because the dividend growth rate fluctuates, and at some periods, the growth rate was greater than the cost of capital. All of these reasons make DDM become unstable overtime. FCFE is chosen to be the best method to valuate MSFT because it is more relevant to the company. Hence, most of the weight is assigned to FCFE.
Valuation Method Intrinsic Value Calculation Weight FCFE $36.07 70% DDM $17.77 20% FCF $10.33 10% Estimated Price $29.84
MSFT stock is now priced at $41.42. The intrinsic price is estimated at $29.84. Therefore, we conclude that MSFT is overpriced and is expected to come down. We recommend that owners of MSFT stock sell.
70%
20%
10%
Weight
FCFE
DDM
FCF
PART 9: TABLES AND SPREADSHEETS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 17
TABLES AND SPREADSHEETS Historical Financial Statements
Income Statement
For$the$Fiscal$Period$EndingReclassified12$months
Jun9309201012$months
Jun9309201112$months
Jun9309201212$months
Jun9309201312$months
Jun93092014Currency USD USD USD USD USD$Revenue &&&&&&62,484.0& &&&&&&69,943.0& &&&&&&73,723.0& &&&&&&77,849.0& &&&&&&86,833.0&Other&Revenue 5 5 5 5 5$$Total$Revenue $$$$$62,484.0$ $$$$$69,943.0$ $$$$$73,723.0$ $$$$$77,849.0$ $$$$$86,833.0$
Cost&Of&Goods&Sold &&&&&&12,395.0& &&&&&&15,577.0& &&&&&&17,530.0& &&&&&&20,249.0& &&&&&&26,934.0&$$Gross$Profit $$$$$50,089.0$ $$$$$54,366.0$ $$$$$56,193.0$ $$$$$57,600.0$ $$$$$59,899.0$
Selling&General&&&Admin&Exp. &&&&&&17,277.0& &&&&&&18,162.0& &&&&&&18,426.0& &&&&&&19,692.0& &&&&&&20,632.0&R&&&D&Exp. &&&&&&&&8,714.0& &&&&&&&&9,043.0& &&&&&&&&9,811.0& &&&&&&10,411.0& &&&&&&11,381.0&Depreciation&&&Amort. 5 5 5 5 5Other&Operating&Expense/(Income) 5 5 5 5 5
$$Other$Operating$Exp.,$Total $$$$$25,991.0$ $$$$$27,205.0$ $$$$$28,237.0$ $$$$$30,103.0$ $$$$$32,013.0$
$$Operating$Income $$$$$24,098.0$ $$$$$27,161.0$ $$$$$27,956.0$ $$$$$27,497.0$ $$$$$27,886.0$
Interest&Expense &&&&&&&(151.0)&& &&&&&&&(295.0)&& &&&&&&&(380.0)&& &&&&&&&(429.0)&& &&&&&&&(597.0)&&Interest&and&Invest.&Income &&&&&&&&&&&843.0& &&&&&&&&&&&900.0& &&&&&&&&&&&800.0& &&&&&&&&&&&677.0& &&&&&&&&&&&883.0&$$Net$Interest$Exp. $$$$$$$$$$$692.0$ $$$$$$$$$$$605.0$ $$$$$$$$$$$420.0$ $$$$$$$$$$$248.0$ $$$$$$$$$$$286.0$
Currency&Exchange&Gains&(Loss) &&&&&&&&&&(64.0)&& &&&&&&&(336.0)&& &&&&&&&(465.0)&& &&&&&&&(223.0)&& &&&&&&&(490.0)&&Other&Non5Operating&Inc.&(Exp.) &&&&&&&&&&(73.0)&& &&&&&&&&&&&167.0& &&&&&&&&&&&&&70.0& &&&&&&&&&&&131.0& &&&&&&&&&&(99.0)&&$$EBT$Excl.$Unusual$Items $$$$$24,653.0$ $$$$$27,597.0$ $$$$$27,981.0$ $$$$$27,653.0$ $$$$$27,583.0$
Restructuring&Charges 5 5 5 5 5Merger&&&Related&Restruct.&Charges 5 5 5 5 &&&&&&&(127.0)&&Impairment&of&Goodwill 5 5 &&&&(6,193.0)&& 5 5Gain&(Loss)&On&Sale&Of&Invest. &&&&&&&&&&&360.0& &&&&&&&&&&&474.0& &&&&&&&&&&&479.0& &&&&&&&&&&&132.0& &&&&&&&&&&&364.0&Legal&Settlements 5 5 5 &&&&&&&(733.0)&& 5Other&Unusual&Items 5 5 5 5 5$$EBT$Incl.$Unusual$Items $$$$$25,013.0$ $$$$$28,071.0$ $$$$$22,267.0$ $$$$$27,052.0$ $$$$$27,820.0$
Income&Tax&Expense &&&&&&&&6,253.0& &&&&&&&&4,921.0& &&&&&&&&5,289.0& &&&&&&&&5,189.0& &&&&&&&&5,746.0&$$Earnings$from$Cont.$Ops. $$$$$18,760.0$ $$$$$23,150.0$ $$$$$16,978.0$ $$$$$21,863.0$ $$$$$22,074.0$
Earnings&of&Discontinued&Ops. 5 5 5 5 5Extraord.&Item&&&Account.&Change 5 5 5 5 5$$Net$Income$to$Company $$$$$18,760.0$ $$$$$23,150.0$ $$$$$16,978.0$ $$$$$21,863.0$ $$$$$22,074.0$
Minority&Int.&in&Earnings 5 5 5 5 5$$Net$Income $$$$$18,760.0$ $$$$$23,150.0$ $$$$$16,978.0$ $$$$$21,863.0$ $$$$$22,074.0$
Pref.&Dividends&and&Other&Adj. 5 5 5 5 5
$$NI$to$Common$Incl$Extra$Items $$$$$18,760.0$ $$$$$23,150.0$ $$$$$16,978.0$ $$$$$21,863.0$ $$$$$22,074.0$
Payout&Ratio&% &24.4%& &22.4%& &37.6%& &34.1%& &40.2%&
PART 9: TABLES AND SPREADSHEETS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 18
Balance'SheetBalance'Sheet'as'of:
Jun13012010 Jun13012011 Jun13012012 Jun13012013 Jun13012014Currency USD USD USD USD USDASSETSCash%And%Equivalents %%%%%%%%%%%%5,505.0% %%%%%%%%%%%%9,610.0% %%%%%%%%%%%%6,938.0% %%%%%%%%%%%%3,804.0% %%%%%%%%%%%%8,669.0%Short%Term%Investments %%%%%%%%%%31,042.0% %%%%%%%%%%41,761.0% %%%%%%%%%%55,096.0% %%%%%%%%%%72,392.0% %%%%%%%%%%76,255.0%Trading%Asset%Securities %%%%%%%%%%%%%%%%%%12.0% E %%%%%%%%%%%%%%%%%%10.0% %%%%%%%%%%%%%%%%%%18.0% %%%%%%%%%%%%%%%%%%17.0%''Total'Cash'&'ST'Investments ''''''''''36,559.0' ''''''''''51,371.0' ''''''''''62,044.0' ''''''''''76,214.0' ''''''''''84,941.0'
Accounts%Receivable %%%%%%%%%%13,014.0% %%%%%%%%%%14,987.0% %%%%%%%%%%15,780.0% %%%%%%%%%%17,486.0% %%%%%%%%%%19,544.0%''Total'Receivables ''''''''''13,014.0' ''''''''''14,987.0' ''''''''''15,780.0' ''''''''''17,486.0' ''''''''''19,544.0'
Inventory %%%%%%%%%%%%%%%%740.0% %%%%%%%%%%%%1,372.0% %%%%%%%%%%%%1,137.0% %%%%%%%%%%%%1,938.0% %%%%%%%%%%%%2,660.0%Deferred%Tax%Assets,%Curr. %%%%%%%%%%%%2,184.0% %%%%%%%%%%%%2,467.0% %%%%%%%%%%%%2,035.0% %%%%%%%%%%%%1,632.0% %%%%%%%%%%%%1,941.0%Other%Current%Assets %%%%%%%%%%%%3,179.0% %%%%%%%%%%%%4,721.0% %%%%%%%%%%%%4,088.0% %%%%%%%%%%%%4,196.0% %%%%%%%%%%%%5,160.0%''Total'Current'Assets ''''''''''55,676.0' ''''''''''74,918.0' ''''''''''85,084.0' ''''''''101,466.0' ''''''''114,246.0'
Gross%Property,%Plant%&%Equipment %%%%%%%%%%16,259.0% %%%%%%%%%%17,991.0% %%%%%%%%%%19,231.0% %%%%%%%%%%22,504.0% %%%%%%%%%%27,804.0%Accumulated%Depreciation %%%%%%%%%(8,629.0)%% %%%%%%%%(9,829.0)%% %%%%%%(10,962.0)%% %%%%%%(12,513.0)%% %%%%%%(14,793.0)%%''Net'Property,'Plant'&'Equipment ''''''''''''7,630.0' ''''''''''''8,162.0' ''''''''''''8,269.0' ''''''''''''9,991.0' ''''''''''13,011.0'
LongEterm%Investments %%%%%%%%%%%%7,754.0% %%%%%%%%%%10,865.0% %%%%%%%%%%%%9,776.0% %%%%%%%%%%10,844.0% %%%%%%%%%%14,597.0%Goodwill %%%%%%%%%%12,394.0% %%%%%%%%%%12,581.0% %%%%%%%%%%13,452.0% %%%%%%%%%%14,655.0% %%%%%%%%%%20,127.0%Other%Intangibles %%%%%%%%%%%%1,158.0% %%%%%%%%%%%%%%%744.0% %%%%%%%%%%%%3,170.0% %%%%%%%%%%%%3,083.0% %%%%%%%%%%%%6,981.0%Other%LongETerm%Assets %%%%%%%%%%%%1,501.0% %%%%%%%%%%%%1,434.0% %%%%%%%%%%%%1,520.0% %%%%%%%%%%%%2,392.0% %%%%%%%%%%%%3,422.0%Total'Assets ''''''''''86,113.0' '''''''108,704.0' ''''''''121,271.0' ''''''''142,431.0' ''''''''172,384.0'
LIABILITIESAccounts%Payable %%%%%%%%%%%%4,025.0% %%%%%%%%%%%%4,197.0% %%%%%%%%%%%%4,175.0% %%%%%%%%%%%%4,828.0% %%%%%%%%%%%%7,432.0%Accrued%Exp. %%%%%%%%%%%%3,283.0% %%%%%%%%%%%%3,575.0% %%%%%%%%%%%%3,875.0% %%%%%%%%%%%%4,117.0% %%%%%%%%%%%%4,797.0%ShortEterm%Borrowings %%%%%%%%%%%%1,182.0% %%%%%%%%%%%%1,208.0% %%%%%%%%%%%%%%%%814.0% %%%%%%%%%%%%%%%%645.0% %%%%%%%%%%%%2,558.0%Curr.%Port.%of%LT%Debt %%%%%%%%%%%%%%%%%%33.0% %%%%%%%%%%%%%%%%%%%%9.0% %%%%%%%%%%%%1,248.0% %%%%%%%%%%%%3,044.0% %%%%%%%%%%%%%%%%%%12.0%Curr.%Income%Taxes%Payable %%%%%%%%%%%%1,074.0% %%%%%%%%%%%%%%%580.0% %%%%%%%%%%%%%%%%789.0% %%%%%%%%%%%%%%%%592.0% %%%%%%%%%%%%%%%%782.0%Unearned%Revenue,%Current %%%%%%%%%%13,652.0% %%%%%%%%%%15,722.0% %%%%%%%%%%18,653.0% %%%%%%%%%%20,639.0% %%%%%%%%%%23,150.0%Def.%Tax%Liability,%Curr. E E E E %%%%%%%%%%%%%%%%125.0%Other%Current%Liabilities %%%%%%%%%%%%2,898.0% %%%%%%%%%%%%3,483.0% %%%%%%%%%%%%3,134.0% %%%%%%%%%%%%3,552.0% %%%%%%%%%%%%6,769.0%''Total'Current'Liabilities ''''''''''26,147.0' ''''''''''28,774.0' ''''''''''32,688.0' ''''''''''37,417.0' ''''''''''45,625.0'
LongETerm%Debt %%%%%%%%%%%%4,939.0% %%%%%%%%%%11,921.0% %%%%%%%%%%10,713.0% %%%%%%%%%%12,601.0% %%%%%%%%%%20,645.0%Unearned%Revenue,%NonECurrent %%%%%%%%%%%%1,178.0% %%%%%%%%%%%%1,398.0% %%%%%%%%%%%%1,406.0% %%%%%%%%%%%%1,760.0% %%%%%%%%%%%%2,008.0%Def.%Tax%Liability,%NonECurr. %%%%%%%%%%%%%%%%229.0% %%%%%%%%%%%%1,456.0% %%%%%%%%%%%%1,893.0% %%%%%%%%%%%%1,709.0% %%%%%%%%%%%%2,728.0%Other%NonECurrent%Liabilities %%%%%%%%%%%%7,445.0% %%%%%%%%%%%%8,072.0% %%%%%%%%%%%%8,208.0% %%%%%%%%%%10,000.0% %%%%%%%%%%11,594.0%Total'Liabilities ''''''''''39,938.0' ''''''''''51,621.0' ''''''''''54,908.0' ''''''''''63,487.0' ''''''''''82,600.0'
Common%Stock %%%%%%%%%%62,856.0% %%%%%%%%%%63,415.0% %%%%%%%%%%65,797.0% %%%%%%%%%%67,306.0% %%%%%%%%%%68,366.0%Additional%Paid%In%Capital E E E E ERetained%Earnings %%%%%%(17,736.0)%% %%%%%%%%(8,195.0)%% %%%%%%%%%%%%(856.0)%% %%%%%%%%%%%%9,895.0% %%%%%%%%%%17,710.0%Treasury%Stock E E E E EComprehensive%Inc.%and%Other %%%%%%%%%%%%1,055.0% %%%%%%%%%%%%1,863.0% %%%%%%%%%%%%1,422.0% %%%%%%%%%%%%1,743.0% %%%%%%%%%%%%3,708.0%''Total'Common'Equity ''''''''''46,175.0' ''''''''''57,083.0' ''''''''''66,363.0' ''''''''''78,944.0' ''''''''''89,784.0'
Total'Equity ''''''''''46,175.0' ''''''''''57,083.0' ''''''''''66,363.0' ''''''''''78,944.0' ''''''''''89,784.0'
Total'Liabilities'And'Equity ''''''''''86,113.0' '''''''108,704.0' ''''''''121,271.0' ''''''''142,431.0' ''''''''172,384.0'
PART 9: TABLES AND SPREADSHEETS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 19
Cash%FlowFor%the%Fiscal%Period%Ending 12%months
Jun9309201012%months
Jun9309201112%months
Jun9309201212%months
Jun9309201312%months
Jun93092014Currency USD USD USD USD USD%Net%Income %%%%%%%%18,760.0% %%%%%%%%23,150.0% %%%%%%%%16,978.0% %%%%%%%%21,863.0% %%%%%%%%22,074.0%Depreciation+&+Amort. ++++++++++1,800.0+ ++++++++++2,000.0+ ++++++++++2,200.0+ ++++++++++2,600.0+ ++++++++++3,400.0+Amort.+of+Goodwill+and+Intangibles ++++++++++++++707.0+ ++++++++++++++537.0+ ++++++++++++++558.0+ ++++++++++++++739.0+ ++++++++++++++845.0+Depreciation%&%Amort.,%Total %%%%%%%%%%2,507.0% %%%%%%%%%%2,537.0% %%%%%%%%%%2,758.0% %%%%%%%%%%3,339.0% %%%%%%%%%%4,245.0%
Other+Amortization ++++++++++++++++97.0+ ++++++++++++++114.0+ ++++++++++++++117.0+ ++++++++++++++210.0+ ++++++++++++++200.0+(Gain)+Loss+On+Sale+Of+Invest. ++++++++++(208.0)++ ++++++++++(362.0)++ ++++++++++(200.0)++ ++++++++++++++++80.0+ ++++++++++(109.0)++Asset+Writedown+&+Restructuring+Costs P P ++++++++++6,193.0+ P PStockPBased+Compensation ++++++++++1,891.0+ ++++++++++2,166.0+ ++++++++++2,244.0+ ++++++++++2,406.0+ ++++++++++2,446.0+Tax+Benefit+from+Stock+Options ++++++++++++(45.0)++ ++++++++++++(17.0)++ ++++++++++++(93.0)++ ++++++++++(209.0)++ ++++++++++(271.0)++Other+Operating+Activities ++++++++++++++410.0+ ++++++++++2,409.0+ ++++++++++3,803.0+ ++++++++++2,519.0+ ++++++++++3,022.0+Change+in+Acc.+Receivable +++++++(2,238.0)++ +++++++(1,451.0)++ +++++++(1,156.0)++ +++++++(1,807.0)++ +++++++(1,120.0)++Change+In+Inventories ++++++++++++(44.0)++ ++++++++++(561.0)++ ++++++++++++++184.0+ ++++++++++(802.0)++ ++++++++++(161.0)++Change+in+Acc.+Payable ++++++++++++++844.0+ ++++++++++++++++58.0+ ++++++++++++(31.0)++ ++++++++++++++537.0+ ++++++++++++++473.0+Change+in+Other+Net+Operating+Assets ++++++++++2,099.0+ +++++++(1,049.0)++ ++++++++++++++829.0+ ++++++++++++++697.0+ ++++++++++1,432.0+%%Cash%from%Ops. %%%%%%%%24,073.0% %%%%%%%%26,994.0% %%%%%%%%31,626.0% %%%%%%%%28,833.0% %%%%%%%%32,231.0%
Capital+Expenditure +++++++(1,977.0)++ +++++++(2,355.0)++ +++++++(2,305.0)++ +++++++(4,257.0)++ +++++++(5,485.0)++Cash+Acquisitions ++++++++++(245.0)++ ++++++++++++(71.0)++ ++++(10,112.0)++ +++++++(1,584.0)++ +++++++(5,937.0)++Divestitures P P P P PInvest.+in+Marketable+&+Equity+Securt. +++++++(7,590.0)++ ++++(13,216.0)++ ++++(11,975.0)++ ++++(17,802.0)++ +++++++(7,324.0)++Net+(Inc.)+Dec.+in+Loans+Originated/Sold P P P P POther+Investing+Activities +++++++(1,502.0)++ ++++++++++1,026.0+ ++++++++++(394.0)++ ++++++++++(168.0)++ ++++++++++++(87.0)++%%Cash%from%Investing %%%%(11,314.0)%% %%%%(14,616.0)%% %%%%(24,786.0)%% %%%%(23,811.0)%% %%%%(18,833.0)%%
Short+Term+Debt+Issued P P P P ++++++++++++++500.0+LongPTerm+Debt+Issued ++++++++++4,167.0+ ++++++++++6,960.0+ P ++++++++++4,883.0+ ++++++++10,350.0+Total%Debt%Issued %%%%%%%%%%4,167.0% %%%%%%%%%%6,960.0% 9 %%%%%%%%%%4,883.0% %%%%%%%%10,850.0%Short+Term+Debt+Repaid ++++++++++(991.0)++ ++++++++++(186.0)++ P P PLongPTerm+Debt+Repaid +++++++(2,986.0)++ ++++++++++(814.0)++ P +++++++(1,346.0)++ +++++++(3,888.0)++Total%Debt%Repaid %%%%%%(3,977.0)%% %%%%%%(1,000.0)%% 9 %%%%%%(1,346.0)%% %%%%%%(3,888.0)%%
Issuance+of+Common+Stock ++++++++++2,311.0+ ++++++++++2,422.0+ ++++++++++1,913.0+ ++++++++++++++931.0+ ++++++++++++++607.0+Repurchase+of+Common+Stock ++++(11,269.0)++ ++++(11,555.0)++ +++++++(5,029.0)++ +++++++(5,360.0)++ +++++++(7,316.0)++
Common+Dividends+Paid +++++++(4,578.0)++ +++++++(5,180.0)++ +++++++(6,385.0)++ +++++++(7,455.0)++ +++++++(8,879.0)++Total%Dividends%Paid %%%%%%(4,578.0)%% %%%%%%(5,180.0)%% %%%%%%(6,385.0)%% %%%%%%(7,455.0)%% %%%%%%(8,879.0)%%
Special+Dividend+Paid P P P P POther+Financing+Activities ++++++++++++++++55.0+ ++++++++++++(23.0)++ ++++++++++++++++93.0+ ++++++++++++++199.0+ ++++++++++++++232.0+%%Cash%from%Financing %%%%(13,291.0)%% %%%%%%(8,376.0)%% %%%%%%(9,408.0)%% %%%%%%(8,148.0)%% %%%%%%(8,394.0)%%
Foreign+Exchange+Rate+Adj. ++++++++++++(39.0)++ ++++++++++++++103.0+ ++++++++++(104.0)++ +++++++++++++++(8.0)++ ++++++++++(139.0)++%%Net%Change%in%Cash %%%%%%%%%%(571.0)%% %%%%%%%%%%4,105.0% %%%%%%(2,672.0)%% %%%%%%(3,134.0)%% %%%%%%%%%%4,865.0%
PART 9: TABLES AND SPREADSHEETS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 20
Forecast of Future Financial Statements
Microsoft)Co
rporation)MSFT
8.26%
4.99%
6.65%
4.53%
5.06%
(In.M
illions)
1.0826
1.0499
1.06550
1.0453
1.0506
Income'Statem
ent
2014
2015
2016
2017
2018
2019
Sales/Re
venu
e86,833
94,005
98696
105161
109925
115487
COGS
26,934
29,159
30,614
32,619
34,097
35,822
Gross'P
rofit
59,899
64,847
68,083
72,542
75,828
79,665
SG&A
20,632
22,336
23,451
24,987
26,119
27,440
R&D
11,381
12,321
12,936
13,783
14,408
15,137
Other.Ope
ratin
g.To
tal
32,013
34,657
36,387
38,770
40,526
42,577
Ope
ratin
g'Income
27,886
30,189
31,696
33,772
35,302
37,088
Interest.Expen
se(597
)(646
)(679
)(723
)(756
)(794
)Interest.and
.Invest..Incom
e883
956
1,004
1,069
1,118
1,174
Net'In
terest'Expen
se286
310
325
346
362
380
Curren
cy.Exchange.Ga
ins(Loss)
(490
)(530
)(557
)(593
)(620
)(652
)Other.Non
ROpe
ratin
g.Inc..(E
xp)
(99)
(107
)(113
)(120
)(125
)(132
)EB
T'Excl.'U
nusual'Item
s27,583
29,861
31,351
33,405
34,918
36,685
Merger.&
.Related
.Restruct..Ch
arges
(127
)R
RR
RR
Gain(Loss).on.Sale.of.Invest.
364
394
414
441
461
484
EBT'Inclu.'Unu
sual'Item
s27,820
30,255
31,765
33,846
35,379
37,169
Income.Tax.Expe
nse
5746
6,363
6,680
7,118
7,440
7,817
Earnings'from
'Con
t.'Ops.
22,074
23,893
25,085
26,728
27,939
29,352
Net'In
come'to'Com
pany
22,074
23,893
25,085
26,728
27,939
29,352
PART 9: TABLES AND SPREADSHEETS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 21
Microsoft)Corpo
ratio
n)MSFT
In#M
illions
Balance'Sheet
2014
2015
2016
2017
2018
2019
Assets
Cash#&#Equ
ivalen
ts8,669
9,385
9,853
10,499
10,974
11,530
Short#T
erm#Investmen
ts76,272
82,572
86,692
92,371
96,555
101,441
Total'Cash&
'ST'Investmen
ts84,941
91,957
96,546
102,870
107,530
112,971
Accoun
ts#Receivables
19,544
21,158
22,214
23,669
24,741
25,993
Total'R
eceivables
19,544
21,158
22,214
23,669
24,741
25,993
Inventory
2,660
2,880
3,023
3,221
3,367
3,538
Other#Current#Assets
7,101
7,688
8,071
8,600
8,989
9,444
Total'Current'Assets
114,246
123,683
129,854
138,360
144,628
151,946
Gross#Prope
rty,#Plant#&#Equ
ipmen
t27,804
30,101
31,603
33,673
35,198
36,979
Accumulated
#Dep
reciation
(14,79
3)(16,01
5)(16,81
4)(17,91
5)(18,72
7)(19,67
5)Net'PP&
E13,011
14,086
14,789
15,757
16,471
17,304
LongQterm#Investmen
ts14,597
15,803
16,591
17,678
18,479
19,414
Goo
dwill
20,127
21,789
22,877
24,375
25,479
26,769
Other#Intangibles
6,981
7,558
7,935
8,454
8,837
9,285
Other#Lon
gQTerm
#Assets
3,422
3,705
3,890
4,144
4,332
4,551
Total'A
ssets
172,384
186,623
195,935
208,769
218,226
229,269
Liab
ilitie
sAccoun
ts#Payable
7,432
8,046
8,447
9,001
9,408
9,884
Accrue
d#Expe
nse
4,797
5,193
5,452
5,810
6,073
6,380
PART 9: TABLES AND SPREADSHEETS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 22
ShortQTerm
#Borrowings
2,558
2,769
2,907
3,098
3,238
3,402
Other#Current#Liabilities
30,838
33,385
35,051
37,347
39,039
41,014
Total'Current'Liabilities
45,625
49,394
51,858
55,255
57,758
60,681
Long#Term
#Debt
20,645
22,350
23,466
25,003
26,135
27,458
Other#NonQCurrent#Liabilities
16,330
17,679
18,561
19,777
20,673
21,719
Total'Liabilities
82,600
89,423
93,885
100,034
104,566
109,857
Common#Stock
68,366
74,013
77,706
82,796
86,547
90,926
Additional#Paid#In#Capital
Retained#Earnings
17,710
19,173
20,130
21,448
22,420
23,554
Comprehensive#Inc.#&#Other
3,708
4,014
4,215
4,491
4,694
4,932
Total'Com
mon
'Equ
ity89,784
97,200
102,050
108,735
113,660
119,412
Total'Equ
ity89,784
97,200
102,050
108,735
113,660
119,412
Total'Liabilities'&
'Equ
ity172,384
186,623
195,935
208,769
218,226
229,269
PART 9: TABLES AND SPREADSHEETS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 23
In#M
illions
Statem
ent'o
f'Cash'Flow
s2014
2015
2016
2017
2018
2019
Net#Income
22,074
23,893
25,085
26,728
27,939
29,352
Depreciatio
n2,280
1,222
799
1,101
812
948
Change#in#A/R
(2,058
)(1,614
)(1,056
)(1,455
)(1,072
)(1,252
)Ch
ange#in#Inv
(732
)(220
)(144
)(198
)(146
)(170
)Ch
ange#in#A/P
2,604
614
401
553
408
476
Change#in#Accruals
680
396
259
357
263
307
Change#in#Other#CA
(1,273
)(587
)(384
)(529
)(390
)(455
)CF'from
'Ope
ratio
ns23,575
23,704
24,962
26,558
27,814
29,206
Change#in#Gross#Fixed
#Assets
(5,300
)(2,297
)(1,502
)(2,070
)(1,525
)(1,781
)Ch
ange#in#Sho
rtNTerm#Invest.
(3,862
)(6,300
)(4,120
)(5,678
)(4,184
)(4,886
)Ch
ange#in#Lon
g#Term
#Invest.
(11,68
6)(3,727
)(2,438
)(3,360
)(2,476
)(2,891
)CF'from
'Investmen
t'(20,84
8)(12,32
4)(8,060
)(11,10
8)(8,185
)(9,557
)
Change#in#Sho
rtNTerm#Borro.
1,913
211
138
190
140
164
Change#in#Lon
gNTerm
#Deb
t8,044
1,705
1,115
1,537
1,133
1,322
Change#in#Com
mon
#Stock
1,060
5,647
3,693
5,090
3,751
4,379
Repu
rchase#Com
mon
#Stock
N(8,617
)(11,29
0)(10,87
0)(12,93
9)(13,15
1)Paym
ent#o
f#Cash#Divide
nds
(8,879
)(9,611
)(10,09
0)(10,75
1)(11,23
8)(11,80
7)CF'from
'Finan
cing'
2,138
(10,66
4)(16,43
3)(14,80
4)(19,15
3)(19,09
2)
Net#Cash#Flow
4865
716
468
646
475
557
Beg.#Cash#
3804
8,669
9,385
9,853
10,499
10,974
End#Cash#
8669
9,385
9,853
10,499
10,974
11,530
PART 9: TABLES AND SPREADSHEETS
MICROSOFT ANALYSIS AND VALUATION PROJECT | 24
Earnings Per Share EARNINGS PER SHARE EPS
2014A $2.68 2015E $2.90
8239 shares outstanding 2016E $3.04
2017E $3.24 2018E $3.39 2019E $3.56
ASSUMPTION: Shares outstanding remains constant at 8239.
EPS $(1.00)
$1.00
$3.00
$5.00
2014A 2015E 2016E 2017E 2018E 2019E
Earnings Per Share
EPS
PART 10: BIBLIOGRAPHY
MICROSOFT ANALYSIS AND VALUATION PROJECT | 25
REFERENCES
Capital IQ (2014, December 31). Microsoft Financial Statements. Retrieved March 15, 2015. Jurevicius, O. (n.d.). SWOT analysis of Microsoft. Retrieved April 8, 2015, from
http://www.strategicmanagementinsight.com/swot-‐analyses/microsoft-‐swot-‐analysis.html
MICROSOFT CORP (MSFT:NASDAQ GS): Stock Quote & Company Profile. (2015, April 8).
Retrieved April 9, 2015, from http://www.bloomberg.com/research/stocks/snapshot/snapshot.asp?ticker=MSFT
Microsoft Corporation. (n.d.). Retrieved April 7, 2015, from
https://www.capitaliq.com/CIQDotNet/company.aspx?companyId=21835 Microsoft Investor Relations -‐ Risk Factors. (n.d.). Retrieved April 8, 2015, from
http://www.microsoft.com/investor/EarningsAndFinancials/Earnings/RisksAndUncertainities/FY10/Q4/RisksAndUncertainties.aspx
Mogg, T. (2015, January 26). Windows wins a few buyers! Surface and Lumia sales reach
new highs. Retrieved April 8, 2015, from http://www.digitaltrends.com/mobile/microsoft-‐surface-‐and-‐lumia-‐sales-‐break-‐records-‐but-‐profit-‐drops/
Ruddick, G. (2015, January 26). Falling Windows sales hits Microsoft profits. Retrieved
April 9, 2015, from http://www.telegraph.co.uk/technology/microsoft/11371095/Falling-‐Windows-‐sales-‐hits-‐Microsoft-‐profits.html