SUMMARY:
Now we have got a breakdown of some of the line items in a typical financial statement:
FY End Jun 2008
Revenue = 8,140
COR = 4,571(*)
Gross Margin = 3,569(*)
Note: We will be using gross margin, instead of net profit for the games analysis.
Less:
Sales & Marketing = 1,256(*)
R&D = 1,586(*)
Headcount, Other Expenses and Variance (HOV) = 301(*)
To explain: HOV is just the number we need to plug in to make the numbers equal as per MSFT actual reported statements. As per its definition, variance is just things we just cannot account for, without more information.
Net Profit = 426 million = actual reported figure
So for FY End Jun 2007 – we have figured out some numbers on the Revenue and Expense side to make the numbers fit.
Using the same methodology…
FY End Jun 2007
Revenue = 6,083
COR = 4,194(*)
Gross Margin = 1,889(*)
Less:
RROD (One Time Charge) = 1,060
Sales & Marketing = 1,163(*)
R&D = 1,344(*)
Headcount, Other Expenses and Variance (HOV) = 214(*)
Net LOSS = ($1,892) = actual reported figure
A quick check indicates that HOV makes some sense, because MSFT did report a 21% increase in headcount in FY end Jun 2008. So HOV for FY end Jun 2008 should be higher than FY end Jun 2007 – which is the case here.
