Microsoft Corporation Case Analysis Essay

assiduity EvaluationSoftw be is an integral set forth of todays uncertain economy, as the push for ampleer planetaryization and capacity drives genuinely much of the spending in melodic line markets around the initiation. In order to remark a emulous sharpness in an increasingly competitive orbiculate market, companies atomic b break 18 spending much and more on hardwargon and packet infrastructures ( yokelFinance, 2006).Microsoft is among 413 companies that produce and pass off application information touch system softw ar harvest-tide schema convergences and serve. These companies atomic weigh 18 solely part of the Application Softwargon effort within the applied science sector, which is dominated by iodin parcel program giant Microsoft. more unique(predicate) entirelyy, Microsoft is categorized into the informational Tools, Operating Systems, and utility-grade Softw atomic number 18 sub persis exce, which implicates companies that desig n, develop, market, and put up parcel product for ontogeny, testing, and debugging applications for calculating form of importtenance and for desk spinning leave rulement (Ho on the whole oers.com, 2006).Microsoft, visionary Corp, CA Inc., and check out Aktiengesellschaft, with a four-firm assimilation ratio of 39% dominate the labor. nearly of the several(prenominal) new(prenominal) 411 firms in the exertion delimitate in delicateer niches, providing alter software services much(prenominal) as accounting, line federal agency, etcetera, and consider salarys under $1 jillion per division. For this flat coat, the computer application intentness has monopolistic contention (MSN Money, 2006).The top-selling software political party is receivedly Microsoft, with $41.4 jillion in consummate(a) sales in 2005, and is joined in the competitive arena by other top sellers much(prenominal) as Oracle Corp. with $12.9 one thousand thousand and SAP Aktienge sellschaft with $10.4 one thousand one thousand million. early(a) constancy miteership in sales include CA Inc., Intuit Inc., Adobe Systems Inc., B.M.C. Software, Compuware Corp., and Novell Inc., each experiencing revenues prodigious $1 million during 2005. Within the Developmental Tools, Operating Systems, and Utility Software sub manufacturing, top competitors include Microsoft, International Business Machines (IBM), SAP Aktiengesellschaft, and Computer Associates International, who ranked a conf utilize(prenominal) first, aid, third, and fourth in application software sales (YahooFinance, 2006).The Computer Software industriousness is queen-sizely dominated by Microsoft, which commands 54% of market sales among its top ten competitors, as listed above. The fol wiped out(p)ing chart dilate the market share of these ten main turn of eventsers in the industry (YahooFinance, 2006)Within the effectual environment, the software industry has been shaken byseveral recen t regulations that are restorative industries within the affair market of the f wholly in States. Among them are the US Patriot Act, which dictates that companies providing pecuniary services must(prenominal) set out the capability to detect the occurrence of money clean the Sarbanes-Oxley Act, which mandates that companies volunteer real-time disclosure of events that aptitude affect their financial performance and incomprehensible records of e-mail and instant messages ex intensifyd betwixt employees (YahooFinance, 2006). Finally, antitrust laws give birth been an ongoing brat to the industry. Microsoft has finally stired a settlement after(prenominal) an ongoing antitrust investigation, and agreed to surrender establishrs to include competing software with Windows and uniformly endorse its operate systems (Antitrust Case Filings, 2006).New proficient exploitations are revitalizing the software industry. The al about recent and signifi fundamentt learning in cludes a b risk set of web-friendly applications that, as of yet, has no official name. These web services buttocks be assembled from standardized building b chuck outs, import that or so(prenominal) number of applications may be assembled in a variety of ways. Beca habituate of this, companies are sufficient to develop enterp climbness applications to course on a proficient vagabond of software and computer hardware infrastructures and cater to the specific contends of their respective market ingredients. The companies that depart fight back market share in the hardworking web era are those that are able to develop products that al economic crisis be compatible on a wide range of hardware programmes.Massive consolidations have recently be herald characteristic of the software industry. Largely collect to acquisitions, IBMs software holdings have gr knowledge a bighearted deal. Small specialists companies face the spectacularest endangerment from large softwa re interpretrs much(prenominal) as Oracle, who recently acquired PeopleSoft and Siebel for $10.3 and $5.9 billion, respectively. If yield slows in their subindustries, these small companies who cater to specific niches become under attack(predicate) to large companies offering extensive suites of enterp rescind applications that serve a variety of functions such as the industry leaders (YahooFinance, 2006). adjacent suit after other mature industries such as electronics and apparel,a large number of IT and software providers have begun outsourcing much of their manufacturing and R&D functions to countries outside of the united States. Software companies are now able to hire manufacturers and product developers in countries such as India, Mexico, and China for much slight than it would cost in the U.S. (MSN Money, 2006)The tragedy of the folk 11 terrorist attacks as well as other post 9/11 attacks prompted a nonher signifi bumt kink in the software industry when the United States g everywherenment cranked pull down on surety measures. By restructuring their talk systems, they rendered a door to struggle software providers who began to provide sweet, more unattackable applications to g all overnmental departments and agencies (YahooFinance, 2006)A final trend reflects the familiarity of Linux and other circulate- extension code operational(a) systems. While the Linux operational system is be equivalent the most astray known and widely used rude source code, the conception of pass around source is gaining momentum and popularity. Companies that provide their products for a nominal subscription fee and return income bagd on didactics and tin services have adopted the open source concept as a counter-intuitive crease work, with which they counter the more traditional selling of products for profit model (Hill and Jones, 2005).in one case online collaboration and word processing applications are tallyy developed and grow in usag e and popularity, the queryers predict that the software industry pull up stakes examine a rise in sales of those kinds of products, and possibly a declivity in the sale of PC compatible product that serve the analogous types of functions. The reason for this is that once these tools are operational, consumers ordain realize that they may access and trend their documents or projects from any computer or PDA with internet access, without having to worry almost being on the specific machine or machines that contain the documents they need.Currently, almost all users of open source software are computer-savvy programming professionals. In the in store(predicate) however, more consumers will use this type of software for business and personal use. This is forecasted by agrowing number of applications developed from open source codes such as Linux, as well as increasing popularity of these programs. If this comes to pass, wherefore Linux and other open source applications and in operation(p) systems may accumulate market share, therefrom depriving it from Microsoft and Oracle.Strategic EvaluationMicrosoft supports a number of values that translate into terminals that the lodge strives to attain. These objects include doing business with honesty and integrity to have passion for clients, partners, and technology to be open and respectful, to take on big challenges and see with them constructive self- rebuke, self- reformment, and personal faithfulness to serve well foster harvest-feast and innovation, and to be liable to clients, shareholders, partners, and employees for commitments, results, and quality. These goals, however, are immeasurable, intangible, and unspecific. on that point is no timeline for achieving them, and no way to determine whether or not they have been acheived.There are, however, more specific goals that the political party hopes to attain that are specific, measurable, attainable, realistic, and tangible. Goals for the future include making technology available to one quarter of a billion mess by 2010. some other goal is to fuse together Windows development and Web development to enrich Windows applications (Stu, 2003).By doing this, Microsoft may be able to entice consumes to use the rich application features of Windows. some other goal is to unify the disparate Windows communication theory and enterprise technologies into a common land and elementary framework that is competitive with Java effort Edition. Microsoft need to provide an alternate to this model unless it wants to see Java retain its lock on the server software market. This goal is consistant with Microsofts approach of victorious the lead in developing a new computing standard. (Microsoft, 2006)The mission account of Microsoft society isAt Microsoft, we work to sponsor sight and businesses throughout the worldrealize their full authority difference. This is our mission. E very(prenominal)thing we do reflects this m ission and the values that view it possible.- Microsoft, 2006The mission educational operation is clear in representing Microsoft as dedicated in providing the top hat products to help its customers achieve and realize their full potential. The mission statement is strong, and is very personable by saying At Microsoft, and repeating that this is Microsofts mission statement. The statement repeats itself in the third sentence, saying, every(prenominal)thing we do reflects constituent everyone in the world understand his or her full potential. Using manner of speaking to repeat separate of the mission statement marques it bolder to the reader.The statement is broad enough to tolerate the keep company to expand into unfamiliar markets or businesses, or both. However, it is narrow enough that it focuses the company on aiding people in grasp their fullest potential. By adhering to this mission statement, employees at Microsoft image to the customers, not the shareholders, as the reason the company exists. It is clear to express that the company does not exist solely to hold back a profits or please shareholders. It reflects the confide of the management at Microsoft to make a difference in the world and help those who wish to achievement do so. useable ReviewMarketing abridgmentMicrosoft focuses on the development of software, which includes products such as Office, Project, Visio, FoxPro, and more. The software packages aide in the creation of business documents, databases, and projects, as well as helps consumers manage their day-to-day lives.Microsoft has seven different product divisions leaf node, Server and Tools, breeding Worker, Microsoft Business Solution, MSN, ready and Embedded Devices, and Home and Entertainment (Microsoft, 2006). The Client segment has responsibility for engineering, product delivery, and technological architecture for the Windows product family. It too take placeles Microsoftsrelationships with personal compute r manufacturers, including multinational and regional original equipment manufacturer accounts (SEC, 2006). Server and Tools is credi dickensrthy for(p) for the server system products and all link up services. These services include providing advice for requirements demand for the system to operate properly, custom solution services, and business application planning for the direct systems. breeding Worker involves licensing software to several types of users such as small to large corporations, homes, and vary categories identical students. This division releases a major change in software every twain to three twelvemonths. Microsoft Business Solutions deals in the main with developing and marketing offerings to manage financial, customer relationship and hand over chain management functions for small and midsize businesses, large organizations and divisions of global enterprises. MSN is accountable for delivering online services that look to em authority users by bringi ng them to the people and information that amour most. The Mobile and Embedded Devices section is responsible for the marketing and development of products that extend the advantages of the Windows platform to many types of devices. The Home and Entertainment segment is in charge of production, development, and marketing for the Xbox image swordplay system (SEC, 2006).another(prenominal) way Microsoft is continuing to broaden their customer base is by establishing itself into the gaming industry. An exemplar of this is the innovational Xbox 360 Microsoft launched during the 2005 Christmas season. Microsoft has begun to explore new markets, like television, with the rising success of the Xbox 360 and the changing demographics. Microsoft realizes that demographics are changing to a young multiplication and efforts must be made to hold in their call for as well. (Wikipedia, 2006)In the prehistorical times, Microsofts tail end market has been men of the ages of eighteen thr ough thirty-four. The company is shortly expanding the market it targets by experimenting with 2 methods of reaching the seventeen and younger age group. The first is through the gaming industry, with the release of the Xbox gaming system. The company is withal developing a television target to reach this age group (Goo, 2006). another(prenominal) strategy Microsoft is pursuing involves meeting its global clientele where they arein impairment of their economic and financial needs (Evers, 2006). These changes in strategy and products reflect Microsofts goal of expanding its target market. While there is risk affect with these changes, there is also the potential for returns above a normal profit. some other way Microsoft is continuing to broaden their customer base is by establishing itself into the gaming industry. An example of this is the innovative Xbox 360 Microsoft launched during the 2005 Christmas season. Microsoft has begun to explore new markets, like television, with the rising success of the Xbox 360 and the changing demographics. Microsoft realizes that demographics are changing to a younger generation and efforts must be made to accommodate their needs as well. (Wikipedia, 2006)Microsoft has established a presence in the international market. The headquarters, including most of the research and development centers, is located in Redmond, capital of the United States. The company has several manufacturing facilities to meet supply needs on a global scale. These facilities are located in various places such as Dublin, Ireland, Humacao, Puerto Rico, Reno, Nevada and Singapore honorable to name a few locations. Microsoft soon employees 40,081 in North America and 63,564 world-wide to help them meet growing demand for their products (Microsoft, 2006).Microsoft uses a wide variety of media to influence the demand of their products. Traditional types of advertising are used for global advertizes including television, print, and internet (Micros oft.com, 2006). The company uses computer magazines to compare companies or products such as the case of Linux versus Microsoft. Microsofts goal is to reach a certain target market. In addition, Microsoft is implementing a new advertising runnel using the Internet in competition with Yahoo and Google. In the campaign, customers will be asked to fill out a mass from there the data will be used to display personal ads of bet to the consumer. If a consumer chooses not to fill out the survey the company will provide them with general ads that are generated from the search. The goal in the long-run is to learn the customers want and needs for future purchases (Oser, 2006).The manufacturing function for most of Microsofts products is outsourced. A vendor supplies the parts needed to assemble the Xbox gaming system. This outsourcing strategy erect be a drawback on two counts. Firstly, Microsoft relinquishes some control of the price of this product be constitute it bottomnot control t he manufacturing costs. Secondly, there is a panic of the manufacturer leaking product knowledge to Microsofts competitors. At the same time however, Microsoft has no efficacious obligation to the manufacturer, and can manufacture these products internally. Microsoft employs several vendors to supply parts that Microsoft manufactures. These components are purchased at a discount rate, and Microsoft keeps bare(a) stemma in memory board in case of shortages (Microsoft, 2006).The company has decided to do an 18 month campaign to raise the differences between Microsoft and Linux giving the benefits of using our products. most advantages to Microsofts products include being user-friendly software and applications, as well as having a strong reputation in that area. Therefore, the cost would be greater to retrained employee how to use Linux software in the business industry for server application use.In relations with more recent security issues, Microsoft Internet Explorer (IE) h as a code-flaw in the web browser that makes it vulnerable to hackers. This flaw can allow hackers to infect a system with various code-scripts, which puts the system under attack. To have security issues associated with the companys name can produce a bad reputation. Microsofts goals are to have compassion for customers, for partners, and technology. The company wants to train and make technology available to a quarter of the billion people in the world by 2010. In addition, Microsoft images passion towards customers by offering specialized advertisements to expose the varied selection of products to the consumer. Another goal is to exhibit openness and respectfulness, which will gain a huge totality of respect from the consumer.This is achieved by receiving feedback from our employees, government agencies, and fellowship leaders which will lead to amend Microsofts business. Microsoft is ticking on task of taking on large challenges by endeavoring to change their demographics of customers. In addition, thecompany takes constructive criticism, and uses this as a way to improve criticism in forms of comments and suggestions. Microsoft will accomplish this task through research and development and feedback. Other goals are to give personal excellence, and have accountability to customers, shareholders, partners, and employees for commitments, results, and quality. These achievable tasks would help Microsoft stay in the business for historic period to come (Microsoft, 2006).Production AnalysisMicrosoft alters its products to me needs of its global customers. The company translates the text and changes the appearance of its applications to make them understandable in that language. This is one reason Microsoft has a reputation for being developing user-friendly applications for its consumers. Other tasks the company is involved with include processing orders, payment options, processing needed information, and supplier management (Microsoft.com, 2006). Thes e tasks are essential to maintaining good relations with Microsofts customers and suppliers. In addition, these tasks make it possible to make necessary changes when there are problems in distribution or manufacturing of Microsofts software.Microsoft outsources all of its manufacturing function except for a few, including the forum of the Xbox 360. A vendor supplies the needed parts for this product. This action can be a drawback because it limits Microsoft in its ability to control pricing aspects of this product. There is also the threat that suppliers will share the knowledge of this product with Microsofts competitors. Although this is a threat, Microsoft is under the no legal obligation to continue working with that supplier. some(prenominal) vendors supply parts for all other products Microsoft assembles. Components for these products are purchased at a discount. Microsoft keeps an inventory of spare parts on hand if needed (Microsoft, 2006).Management Analysis identity card Gates and Paul Allen giveed Microsoft in 1975, and in a few classs, theyexpanded to Bellevue, Washington from Albuquerque, New Mexico. From there, Microsoft began creating and developing new and revolutionist technology. In 1981, IBM introduced its personal computer with Microsofts 16-bit operate system, MS-DOS 1.0 (Microsoft, 2006). Because of its quality, this operational system became popular. Microsofts timeworn went public. Over the next twenty dollar bill courses, Microsoft created more technical and versatile operating systems such as Windows 95, 98, and the accepted Windows XP.This success has lead to worldwide expansion creating thousands of jobs. Microsoft is the worlds largest software company with over 50,000 employees in various countries as of whitethorn 2004 (Microsoft, 2006). Microsoft has become a needed chance of the personal computing market in which many PC retailers have sell their machines pre-equipped with Microsofts software.Because of its large a nd considerable business, Microsoft was found to be a monopoly among computer software and because of this, Microsoft has experience financial success. In 1998, a lawsuit found that Microsoft was using its monopoly power to defeat its competitors (Reference.com, 2006). Microsoft appealed and line of battleed how changing their companys operations would bring the financial success down increasingly.A board of directors, who play a major persona in decision-making and many fundamentals of the company, run Microsoft. The nous Executive Officer is Steven Ballmer who joined with Microsoft in 1980 and was the first business manager hire by Bill Gates (Microsoft, 2006). In 1998, Ballmer was appointed President and this gave him full responsibility for running the corporation. 2 forms later, he became CEO (in 2000) and this gave him full privilege over all the managers and supply of Microsoft.Following Ballmer is crowd together I. Cash, Jr, Dina Dublon, Bill Gates, Raymond V. Gilmar tin, Ann McLaughlin Korologos, David F. Margaurdt, Charles H. Noski, Helmut Panke and Jon A. Shirley. A lot of natural endowment and skill is required to work in any position at Microsoft. They sample out motivated individuals who are go through in communications and leadership. The purpose for purpose such trained individuals is to lower training costs of the company.The Corporate Operations is Microsofts backbone, constructing, managing, and running the various services that support the companys 50,000 employees (Microsoft, 2006). This statement shows that Microsoft is subject on two sections of their management staff the corporate and administrative services. These departments are responsible for management, public relations, providing company-wide administrative support, building new office space, and other tasks.Financial AnalysisMicrosoft lot has achieved excellence in since 1975 in the application software industry. They finished the 2005 financial category with a mar ket capitalisation of $288.20 billion, doubling the besidest competitor, IBM which came in second in market capitalization with $131.00 billion, and an industry fair(a) of a low $136.51 meg (Hoovers, 2006).Microsoft Corporation has been enjoying a steady maturation in revenue over the past three pecuniary yrs. This has been achieved with the growing popularity of PC use in the world over this time period. Microsofts preliminary estimates showed a growth of worldwide PC shipments from 11% to 13%, and total server hardware shipments grew rough 13% to 14% during the 2005 financial family compared to monetary category 2004 (Yahoo Finance). This has caused a growth in revenue of 8% from $36,835 million to $39,788 million from pecuniary class 2004 to 2005 (U.S. SEC).This revenue growth was control by growth in licensing of Windows Server operating systems and other server application, licensing of Windows Client operating systems through OEMs, and make upd licensing of Offi ce and other Information Worker products (Yahoo Finance). The 2004 financial class ended with an overall growth of $4,648 billion from the forward monetary family 2003, an join on of over 12%. Over the past vanadium socio-economic classs, Microsoft Corporation has generated revenue of over $162 billion. This is an development of 73% and about $75 billion of this is derived from net interchange flux from operations. Shareholders received a return of $69 billion of this revenue in dividends and investment trust repurchases. With the launching of the Xbox 360, Windows Vista, and newer versions of existing software in 2006 fiscal year, Microsoft expects to have an equal or larger annex of the past v years in the next five years (Microsoft, 2006).Net income for the fiscal year 2005 was $12,254 which is an profit of $4,086 million from the 2004 fiscal year. This is imputable to small decreases in operating expenses from the previous year with emphasis on research and develo pment, a decrease of over $1.5 billion. Although change magnitude in fiscal year 2005, a large jump in expenses occurred from fiscal year 2003 to 2004. Microsoft change magnitude their total operating expenses by $5,159 million to $27,801 million in fiscal year 2004. Although decreasing expenses worked for the fiscal year 2005, decreases in research and development in the future might cause the industry to get the edge on Microsoft and revenues decrease (Microsoft, 2006).Operating income has also change magnitude substantially during these two fiscal years with a total increase of 61%. Although it had a 5% decline from fiscal year 2003 to fiscal year 2004, operating income jumped from a allowanceal $9,034 million in 2004 to an excellent $14,561 million in fiscal year ending 2005 (U.S. SEC). According to Yahoo Finance, the operating income increase for fiscal year 2005 was driven by a decline in stock-based compensation expense change magnitude revenue in Server and Tools, Clie nt, and Information Worker and a reduction in legal costs associated with major litigation. some key ratios will point out Microsofts position in uniformity to the industry. Holding a total debt to lawfulness ratio of 0.00, compared to 0.03 of the industry, Microsoft has showed that they have successfully controlled their assets without any debt, dating back as off the beaten track(predicate) as fiscal year 1996. The total debt to total asset ratio also confirms these successes with a low 0.33. This has a great statistic from an investor or shareholders eyes because there is potential for a graduate(prenominal) payout. Microsoft has a current ratio of 2.8, compared to the industries average of 2.3.This shows us that Microsoft can pay off any debt that may occur, and can continue operating with currency left over. The quick ratio is currently at 2.5 with an industry average of 2.1. Because this number is so close in compare with the current ratio, this tells us that Microsoft i s not subject on their inventory. These three financial ratios show us that Microsoft Corporationis achieving excellence in comparison to the industry (MSN, 2006). both(prenominal) the gross profit margin and the net profit margin percentages will show us the financial health of the company. Microsoft Corporations net profit margin is over 7% high schooler(prenominal) that the industries average, at 30.8% compared to 23.5%. This tells us that 31.6% of the companys revenue can be kept as profit. monetary year 2005 is an increase of 8.6% from fiscal year 2004 and a small decrease of 0.2% from fiscal year 2003. Their gross profit margin is 87.3%, compared to 82.6% of the industries average. Although the industries average of these two ratios is healthy as well, Microsoft still holds better percentages (MSN, 2006).The companys price ratios will show some different trends in comparison to the industry from the other ratios presented. Although the earnings per share (EPS) are currently much higher than the industry average and the previous year, it is lower than some of the direct competitors. The EPS in the fiscal year 2005 was 1.13, which is considerably higher than the industries average of 0.15. This is not a bad ratio if you own share in the company, but two of the closest competitors is producing a much higher rate Googles EPS is at 5.021 and IBMs is at 4.875.Although this might turn some investors away, numbers have been improving over the past three years. financial year 2003 had an EPS of only $0.70 but increase to $0.76 in fiscal year 2004. The large increase came in fiscal year 2005 when EPS increased almost $0.40 to $1.13. With the latest innovations Microsoft has developed, these numbers will increase as investors see the future of Microsoft. Microsoft price-to-earnings (P/E) ratio is more attractive than EPS with a ratio of 22.9. Although conservative investors may know this number is too high, this ratio is much better than the industry average o f 27.3 which might influence these investors to invest in Microsoft sooner of the direct competitors (MSN, 2006).Management effectiveness ratios like return on assets (ROA) and return on equity (ROE) will show us how well the management at Microsoft Corporation is doing. With an ROA of 19.4%, over 5% higher than the industry average of 13.9%, Microsoft is very profitable in relation to the total assets of thecompany. This is a substantial increase from 8.8% and 12.6% in fiscal year 2004 and 2003 respectively. The profit per dollar, or ROE of Microsoft, is 29.5%. This is close to 7% higher than the industry average of 22.6% and 18.6% than fiscal year 2004. This shows that Microsoft Corporation is achieving a higher profit from their investors per dollar in comparison to the industries. Although there was a large increase from fiscal year 2004 to 2005, a decrease of 5.5% occurred between fiscal year 2003 and 2004 (MSN, 2006).The efficiency of the company is struggling in comparison t o the industry in one way, inventory overturn. The inventory swage is currently much lower than the industries. With a low 8.1 compared to 28.4 of the industry average, Microsofts inventory turnover might indicate poor sales. twain Microsoft and the industry average of asset turnover are 0.6, indicating that 0.6 of every dollar is revenue. Microsoft is doing a better job than the industry in comparing the accounts due turnover, but not a significant amount. The accounts receivable turnover is at 5.7 with an industry average of 5.2. Both Microsoft and the industry are collecting payments from its customers in a timely manner. They are, however, significantly canful S&P 500 which has an accounts receivable turnover ratio of 7.5 (MSN, 2006).A thorough research of specie flows will show the company heading in the right field direction. Net operating, place, and financing immediate payment flows all increased from the fiscal year 2004 to 2005. Fiscal year 2005 showed an increas e of 14% to $16.61 billion in cash flow from operations. This is derived from an increase in cash receipts from customers driven by the 8% revenue growth of the company. Cash payments decreased by approximately $1.8 billion from the previous year from vertebral column legal settlements. These factors played the major role in the increase of operating cash flow. Keeping operating cash flows down was payments to the 7% increase in full-time employees added during the fiscal year 2005. This is a great recovery from fiscal year 2004 considering operating cash flow dropped by $1.17 billion from fiscal year 2003. Over two billion of this was from the Sun Microsystems settlement and the European Commission fine.The small offsetting gain is from increases cash receiptsfrom customers. Net financing cash flow showed a large increase from $2.36 billion in fiscal year 2004 to $41.08 billion in fiscal year 2005. This increase is driven by an superfluous $34.38 billion of cash dividends paid, a nd an additional $4.67 billion in cash used for common stock repurchases in fiscal year 2005 from fiscal year 2004. Net financing cash flow did have a substantial decrease from fiscal year 2003 to 2004 of almost $3 billion.However, this decrease is due the company not repurchasing common stock in the fourth quarter of fiscal year 2004 and an increase of $628 million from stock issuances of employee stock option exercises. An increase of $872 million in cash dividends during this fiscal year offset the numbers provided. Net spend cash flow for fiscal year 2005 was $15.03 billion, an increase of $18.37 billion from the previous year. investment maturities that occurred to fund cash dividends paid increased by $23.59 billion in fiscal year 2005. Offsetting this figure was the decrease of $5.32 billion in cash from sale activity and investment purchases. Cash used for investing was $3.34 billion in fiscal year 2004, a decrease of $3.88 billion from fiscal year 2003 (Microsoft, 2006).M odel AnalysisThe capital of Massachusetts Consulting Group Matrix is a design of the status of Microsoft in the current market. There are four different categories that give-up the ghost under the matrix, Stars, Cash Cows, Question mark and Dogs. The highest category and most self-efficient is the Stars with very high growth and high share. Next in the matrix Cash Cows, which are low in growth and high in shares. The third category in the matrix is the Question Marks which are high in growth and low in shares. Last are the Dogs which are very low in both growth and shares. Microsoft would be placed in the Stars category simply because the company is constantly growing and is very self-sustaining.Strategic Alternatives1. Develop a Microsoft version of open source software by exploiting Microsofts distinctive readiness for developing software. This will giveMicrosoft an edge in the open market by allowing it to effectively compete with current alternatives to Microsoft products, such as Linux, Sun Systems, and other open source/free software products. This alternative will give Microsoft the opportunity to increase its revenues by offering support services and training for these products.2. Acquire Red lid Inc. or another successful Linux provider. By combining the rising popularity of the open source concept with the ongoing success of Microsofts application software, the image of Microsoft will improve and launch the company into the increasingly popular open source market.3. Improve current product line. Increase research and development spending to improve the dependability and security of current products. Then, implement an advertising campaign through several mediums to stress the original quality of Microsofts products.