Ibm and Microsoft Financial Statement Analysis

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PACE UNIVERSITY- ACC-615 DR. FINN

Financial Statement Analysis
IBM and Microsoft
Bill Jacoby 4/20/2010

Financial Statement analysis for two comparable companies; IBM and Microsoft

ACC-615 Dr. Finn; William Jacoby
Microsoft Corporation is the world’s largest software company. Microsoft has five operating segments; client, server and tools, online business services, Microsoft business division and entertainment and devices division. They develop personal computing software including the Windows operating system which runs 90% of all PC’s currently in use and the Office application suite and the XBOX video game system. International Business Machines Corporation was founded in 1911 and has grown and adopted over nearly a century.
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This seems to me as if it is not so much of a new idea but rather continuing to expand on their success in the services segment. Third is “cloud and nextgeneration data center”. The advent of cloud computing could throttle demand for IBM’s high end powerful hardware and software. Oracle and Sun are attempting to compete with IBM on this new frontier. Naturally the management discussion in the annual report and financial statements indicates that IBM believes this will be a great growth area for IBM. However, it is not going to be without competition but IBM should be one of the beneficiaries if cloud computing grows. The fourth and final growth opportunity IBM management outlines is called, “smarter planet”. In this growth opportunity they describe and map out 300 clients across the globe IBM categorizes in this smarter planet description. They are things such as; integrated baggage control and check-in system at Amsterdam airport, gas and oil seismic imaging efficiency improvements in Venezuela, an intelligent medical records system at Guan Dong Hospital in China. Again this does not sound like a new idea to me but rather a catchy marketing name for increasing and capitalizing on their success in the services segment. Clearly IBM likes these five to seven year highly profitable contracts. This is understandable and a good strategy that should be in the sweet spot for IBM. Turning now to Microsoft I was surprised to learn that total revenue for Microsoft was
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