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Microsoft accounting shuffling resulted in higher revenues for Windows division

Laura June
11.15.10
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Microsoft's Windows division has been on something of a roll recently, but a deeper look into the company's financials seems to indicate that the reported numbers might look better than reality. Information Week has done some deep digging into Microsoft's recent SEC filings and found that several bookkeeping changes resulted in significantly increased reportings of revenues in the company's Windows division. Revenues that had been assigned in previous quarters to other divisions within the company -- mostly the Entertainment and Devices unit which includes highly successful businesses such as Xbox -- were, in this past quarter, re-assigned to the Windows operating system division.

So just how much money was moved? Well, according to Information Week and the relevant SEC filings statements, about $259 million, or a boost of 6.5% in revenue to the division overall for a total of $4.24 billion rather than the $3.98 billion originally stated for Q1 2010. This also resulted in a 25% reduction in revenue for EDD, while the total -- $12.92 billion -- stayed exactly the same. Of course, all these bookkeeping maneuvers mean that Redmond's Windows division looked like it was making a decent amount more cash than it actually was, and when taking into account another complex move -- that of deferring $1.5 billion in upgrade revenues from Windows Vista machines sold in Q4 2009 to Windows 7 in Q1 2010 -- the resulting picture is a bit different than it would appear on the surface. Ultimately, it looks like Microsoft raked in an 11% increase in Windows revenue rather than the 66% reported, when removing both the bookkeeping changes from other units and the upgrade deferrals. Of course, this is all apparently technically on the up-and-up, in terms of financial reporting is concerned, but it does give some insight into the stunning profits recorded in the Windows division as of late.

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