Microsoft asks feds for a bailout

Discussion in 'Wall St. News' started by Lightningdog, Apr 1, 2009.

  1. Microsoft asks feds for a bailout

    San Francisco -

    Microsoft requested on Tuesday some $20 billion in bailout funds from the federal government, claiming that as the company controlling an overwhelming share of the OS market, it is too big to fail. The company said low adoption rates for Windows Vista, the ensuing ad campaign trying to convince people that they really do like Vista, and the increased need for development resources to rush Windows 7 to market to make people forget about Vista have necessitated the bailout.

    "We want to make it absolutely clear that this is not a crisis of mismanagement," said Microsoft CEO Steve Ballmer in a prepared statement. "This is simply a crisis of dollars -- a crisis of not having enough dollars coming our way. And if Microsoft collapses, better than 80 percent of the OS market collapses with us. We are requesting these bailout funds to avoid that undesirable outcome by bridging the gap between now and Windows 7."

    [ Learn more about how the financial crisis is affecting IT and the high-tech industry, plus what IT can do to help, in InfoWorld's special report. ]

    Ballmer didn't say if Microsoft executives would still receive bonuses if the company succeeded in getting bailout funds. He also did not indicate how the company intended to spend any bailout money it might receive, merely explaining that it would be used to "fund operations."

    Microsoft's earnings over the past several quarters have been either flat or falling. Revenue has grown, but the company has increased expenditures, causing net income to decrease. Ballmer said that the company's current trajectory is "unsustainable in the long term" and that a government bailout would put the company back on the right track.

    Irvin Pepper, an analyst with Freamon & Moreland, called the bailout request a "shrewd move" by Microsoft. "It may be unpopular, but Microsoft is so large that it doesn't have to worry about popularity. And the company would be foolish to leave all that money on the table if it can, in fact, get a bailout." Pepper postulated that Microsoft's odds of getting bailout funds are around 3 to 1.

    Pepper also said that his sources within Microsoft were indicating that the money might be used for a surprising purpose: suing Apple, Google, open source companies, and other entities Microsoft has labeled "revenue stealers" in internal communications. Microsoft has antagonized the companies in the past and most recently sued Linux vendor TomTom over alleged patent violations.

    According to Pepper, Microsoft sees litigation as a possible revenue stream, although he believes such a strategy would be for the short term only. "I don't see Microsoft getting into the business of suing everybody willy-nilly," he said. "But as a stopgap measure while it struggles with the economic climate, Microsoft believes litigation can be a revenue-positive undertaking."

    [ April Fool's! Read more of InfoWorld's April Foolery. ]
  2. What a joke. Hardly suprising, but laughable nonetheless. How many other companies are going to come out of the woodwork claiming to be "too big to fail".
  3. BSAM


    I hope the Sonic is too big to fail. Those "happy hour" drinks are a real bargain. When Sonic comes calling, I hope the administration will pull them up.
  4. poyayan


    Playboy is "too big to fail". A USA without playboy mansion is just not the same..:)
  5. I bought 5000 MSFT April puts on this news.

    Free money
  6. new$


    yes, yes
  7. They have $20 billions, it's on their balance sheet.
  8. April fools....
  9. hah, had me going for a second. I almost jabbed out my eyeballs with a letter-opener after reading the words "too big to fail" for just about the thousandth time.