International Financial Management

Topics: Microsoft, Weighted average cost of capital, Bill Gates Pages: 15 (4066 words) Published: March 19, 2013

Overview of the Company 3
Financial Ratios 5
Financial Highlights of the Company 7
Capital Structure 7
Capital Structure of Microsoft 8
Cost of Equity 9
Cost of Debt 9
Microsoft Subsidiaries11
Employment Headcount12
Microsoft and Managing Risk13
Microsoft and Managing Risk in Numbers16
International Tax Consideration18

Overview and History of the Company:
Microsoft is an American corporation headquartered in Redmond, Washington, USA. Microsoft supports the invention of, manufactures, and licenses goods and services related to computing.

Childhood friends, Paul Allen and Bill Gates are the co-founders of Microsoft. The pair were total computer geeks in an age when any access to computers was hard to come by. Allen and Gates skipped classes to live and breathe in their school's computer room. Eventually, they hacked the school's computer but instead of expulsion, the duo were offered unlimited computer time in exchange for helping to improve the computer's performance. Bill Gates and Paul Allen even ran their own small company called Traf-O-Data and sold a computer to the city of Seattle for counting city traffic.

In 1973, Bill Gates left Seattle to attend Harvard University as a pre-law student. However, Gate's first love never left him, as he spent most of his time in Harvard's computer center where he kept improving his programming skills. Soon Paul Allen moved to Boston as well, pressuring Gates to quit Harvard so that the team could work full-time together on their projects. Bill Gates was uncertain of what to do, however, fate stepped in.

In January 1975, Paul Allen read an article about the Altair 8800 microcomputer in Popular Electronics magazine. He showed the article to Bill. Bill Gates called MITS, the makers of the Altair, and offered his and Paul Allen's services to write a version of the new BASIC programming language for the Altair.

In eight weeks, Allen and Gates were able to demonstrate their program to MITS, who agreed to distribute and market the product under the name of Altair BASIC.

The Altair deal inspired Gates and Allen to form their own software company, and Microsoft was started on April 4, 1975, with Bill Gates as the first CEO.

On July 29, 1975, Bill Gates used the name "Micro-soft" in a letter to Paul Allen to refer to their partnership. The name was registered with the secretary of state of New Mexico on November 26, 1976. In August 1977, the company opened their first international office in Japan, called ASCII Microsoft.

In 1981, the company incorporated in the state of Washington and became Microsoft Inc. Bill Gates was the President of the Company and the Chairman of the Board, and Paul Allen was the Executive VP.

The majority of Microsoft's products are related to computing and the interent.

An operating system is the fundamental software that allows a computer to operate. As a newly formed company, Microsoft's first operating system product that was publicly released was a version of Unix called Xenix, released in 1980. Xenix was later used as the basis for Microsoft's first word processor, called Multi-Tool Word (a predecessor to Microsoft Word).

Microsoft's first wildly successful operating system was MS-DOS or Microsoft Disk Operating System, which Microsoft wrote for IBM in 1981, based on Tim Paterson's QDOS. In the deal of the century, Bill Gates only licensed MS-DOS to IBM, by retaining the rights to the software, Bill Gates made a fortune for Microsoft and Microsoft had become a major soft vendor.

Microsoft Mouse was released on May 2, 1983.

In 1983, Microsoft's crowning achievement was released, Microsoft Windows was an operating system with a novel graphical user interface and a multitasking environment for IBM computers. In 1986, the company went public,...
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