Microsoft Screws Up Earnings Release Numbers. An Excel Glitch? [Updates]
Microsoft (MSFT) announced its earnings, and reading through them was enough to raise your eyebrows. Oh, not because of record earnings or slowing Windows sales or strong performance by Office and Xbox 360 and Kinect. No, the real shocker was that not all the numbers in the 10-Q filed with the SEC and the earnings press release were the same. The revenue and operating income (loss) breakout by division were completely different. And not only were the numbers for last quarter different, but the numbers from the same quarter last year were different.
Every number in an earnings release is supposed to be the same as in the 10-Q, which is the legal financial filing. But as I calculated some year-over-year growth numbers for specific divisions, I kept reaching different results than what CFO Peter Klein was quoted as saying in the release. Finally, I compared the two sections, one from the 10-Q filed on 01/27/11 for the period ending 12/31/10, and the other from the press release, also from 1/27/11 and for the same period.
Here is an example of two columns that are supposed to contain exactly the same numbers:
And even more perplexing is that the number from last year had the same problem. What, are there parallel universes in place? The only numbers that agree are the totals. Here are the complete sections in question. All of the corresponding columns are different except for the totals:
And yet, if you add numbers in the corresponding revenue or income column in each column, they add up to the same total, even though the individual numbers are different.
At a quick glance, the income statements, balance sheets, and cash flow statements seem identical. Only the segment revenue and operating income statements differ. (All the tables are labeled as unaudited. Ya think?)
This is the first time I've ever seen a discrepancy like this. Often it would be difficult to discover, because many companies issue a formal 10-Q at sometime after the earnings release comes out. I'll give Microsoft's PR firm a call and see what they might know about this. Hmm, maybe the company should think about using something other than Excel.
[Update 1: I heard back from the PR people. I quote: "I'd be happy to look into this for you. Can you please provide insight regarding your deadline?" How about now?]
[Update 2: Although Microsoft's PR firm has yet to provide any information, the investor relations group, which normally sends reporters off to the PR people, was nice enough to address the question. In short, the 10-Q uses internal Microsoft management measurements with a reconciling item at the bottom. The release version uses GAAP.
The release version does not mention that there will be any difference between it and the 10-Q, although the 10-Q does mention that it is not GAAP accounting. What remains puzzling is why Microsoft does this. For the most part, the differences are relatively small and the GAAP version makes the WIndows and business divisions look better than the internal accounting measures. Could it be that at some point Microsoft used this measure because, at the time, it made something look better? If it's strictly a matter of being more "realistic" about the business than GAAP allows, why not list out the significant differences?]
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