Jae Jun | Old School Value

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recommendation to either buy, hold, or sell any specific security or group of securities. Likewise, nothing herein should be construed as an
endorsement of any financial adviser, investment manager, commercial information provider, transaction service, or brokerage firm.

The findings from this spreadsheet is merely a start to a means of further research and uncovering a great business and investment. Old
School Value holds no responsibility for any investment whatsoever.

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http://www.oldschoolvalue.com/intrinsic-value-spreadsheets/installation-troubleshooting-guide/
Company Name ticker
Microsoft Corp www.oldschoolvalue.com MSFT
9/21/2009 Figures in Millions except per share values

Microsoft Corporation is engaged in developing, manufacturing, licensing, and supporting a range of software products and services for different types of computing devices. The Company operates in five business
segments: Client, Server and Tools, Online Services Business, Microsoft Business Division, and Entertainment and Devices Division. The software products and services include operating systems for servers, personal
computers, and intelligent devices; server applications for distributed computing environments; information worker productivity applications; business solutions applications; computing applications; software
development tools, and video games. The Company provide consulting and product and solution support services, and trains and certifies computer system integrators and developers. It also designs and sells
hardware, including Xbox 360 video game console, the Zune digital music and entertainment device, and peripherals.

Asset Valuation EPV Valuation DCF Valuation Graham Valuation Current Price
Total Net Reprod. Cost $ 4.63 EPV $ 24.36 DCF Price $ 27.91 Graham Price $ 30.04 $ 25.26
Reprod. Cost of Assets BV $ 7.38 Normalized Income $ 19,259.53 Growth Rate 9% Growth Rate 14%
Tangible BV $ 3.09 Discount Rate 9% Discount Rate 9% Normalized EPS $ 1.01
NNWC $ 0.56 Margin of Safety 0% Margin of Safety 9% Margin of Safety 16%

Key Statistics Financial Strength Margins & Profitability

Market Cap (millions) 225,080 Quick Ratio (MRQ) 1.8 Gross (TTM) 79.2 Operating (TTM) 33.56 Net Profit (TTM) 24.93
52-Week High 27.66 Current Ratio (MRQ) 1.82 Gross - 5 Yr. Avg. 81.06 Operating - 5 Yr. Avg. 36.03 Net Profit - 5 Yr. Avg.28.01
52-Week Low 14.87 LT Debt to Equity (MRQ) 9.47 EBITD (TTM) 37.94 Pre-Tax (TTM) 33.92
% off 52-Week Low 69.9% Total Debt to Equity (MRQ) 14.53 EBITD - 5 Yr. Avg. 38.98 Pre-Tax - 5 Yr. Avg. 38.82

Valuation Ratios Growth Stats Management Effective Efficiency

P/E Ratio (TTM) 15.59 Sales (MRQ) vs Qtr. 1 Yr. Ago -17.29 ROA (TTM) 19.34 Revenue/Employee (TTM) 628355
Price to Sales (TTM) 3.85 Sales (TTM) vs TTM 1 Yr. Ago 3.85 ROA - 5 Yr. Avg. 19.63 Net Income/Employee (TTM)
156656
Price to Book (MRQ) 5.69 Sales - 5 Yr. Growth Rate 9.67 ROI (TTM) 31.08 Receivable Turnover (TTM) 4.72
Price to Tangible Book (MRQ) 8.9 EPS (MRQ) vs Qtr. 1 Yr. Ago -25.55 ROI - 5 Yr Avg 28.63 Inventory Turnover (TTM) 14.28
Price to Cash Flow (TTM) 13.14 EPS (TTM) vs TTM 1 Yr. Ago -13.36 ROE (TTM) 38.42 Asset Turnover (TTM) 0.78
Price to Free Cash Flow (TTM) 19.66 EPS - 5 Yr. Growth Rate 16.65 ROE - 5 Yr. Avg. 33.44
Enterprise Value/Revenue (TTM) 3.44 Capital Spending - 5 Yr. Grwth 22.98
Enterprise Value/EBITDA (TTM) 8.636

Historical Stock Price Vs Intrinsic Value Per Share

60

50

Historical Price
40

30 Intrinsic Value

20
Buy Price

10

0
9/28/1998 9/28/1999 9/28/2000 9/28/2001 9/28/2002 9/28/2003 9/28/2004 9/28/2005 9/28/2006 9/28/2007 9/28/2008

Multi-Year Performance
2000-2007 2001-2008 2002-2009 2000-2005 2001-2006 2002-2007 2003-2008 2004-2009 Median
Shareholder Equity -6.7% -10.2% -9.4% 1.4% -5.5% -12.8% -17.3% -18.7% -9.8%
Free Cash Flow 5.2% 11.4% 8.1% 5.8% 8.9% 10.2% 9.4% 11.2% 9.2%
CROIC 19.4% 20.8% 26.2% 16.6% 16.6% 20.8% 26.2% 33.1% 20.8%
FCF/Sales 29.7% 28.1% 27.2% 30.8% 29.7% 27.8% 27.2% 26.4% 27.9%
ROA 14.3% 14.3% 16.5% 13.4% 13.4% 14.3% 16.5% 18.6% 14.3%
ROE 18.8% 18.8% 24.2% 17.1% 17.1% 18.8% 24.2% 33.5% 18.8%
Revenue Growth 12.1% 13.2% 10.9% 11.6% 11.8% 12.5% 13.4% 9.7% 12.0%
Gross Margin 82.5% 82.1% 81.7% 83.4% 82.5% 82.1% 82.1% 81.3% 82.1%
Operating Margin 39.1% 37.2% 36.9% 41.5% 39.1% 36.9% 36.9% 36.4% 37.1%
Net Margin 28.7% 28.7% 28.0% 29.9% 28.7% 28.0% 28.9% 28.0% 28.7%
Earnings Growth 7.6% 16.0% 12.5% 5.7% 12.7% 14.9% 15.2% 16.7% 13.8%
Cash from Ops Growth 3.5% 7.0% 4.0% 3.5% 1.4% 4.2% 6.5% 5.4% 4.1%
 Margin Percentages

100.0%
86.9% 86.3%
90.0% 82.3% 84.4% 82.7%
81.7% 81.8% 80.8%
79.1% 79.2%
80.0%

70.0%

60.0%
47.6% 46.3% Gross Margin
50.0% 41.0% 42.0% 41.1%
36.6% 37.2% 36.2% 37.2% Operating Margin
40.0% 34.8%
29.0% 31.0% 30.8% 29.3% Net Margin
27.6% 28.5% 27.5%
30.0% 24.5% 24.9%
22.2%
20.0%

10.0%

0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Free Cash Flow vs Tangible Shareholder Equity Trend Efficiency & Profitability

$80,000.0 70.0%

$70,000.0 60.0%
$60,000.0
50.0%
$50,000.0
40.0% CROIC
$40,000.0 FCF FCF/Sales
30.0%
$30,000.0 Shareholder Equity ROA
20.0% ROE
$20,000.0

$10,000.0 10.0%

$- 0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Sales vs Accounts Receivables CAPEX vs PPE

$70,000.0 $10,000.0
$9,000.0
$60,000.0
$8,000.0
Last 6 yrs
$50,000.0 $7,000.0
Last 5 yrs
$6,000.0
$40,000.0
Sales Last 4 yrs
$5,000.0
$30,000.0 Accts Receivable Last 3 yrs
$4,000.0
Inventory Last 2 yrs
$20,000.0 $3,000.0
Last 1 yr
$2,000.0
$10,000.0 PPE
$1,000.0
$- $-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 TTM 2003 2004 2005 2006 2007 2008 2009 TTM
Company Name ticker
Microsoft Corp MSFT
9/21/2009 Figures in Millions except per share values
Financial Data
MSFT 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 TTM
Income Statement
Revenue $ 22,956.0 $ 25,296.0 $ 28,365.0 $ 32,187.0 $ 36,835.0 $ 39,788.0 $ 44,282.0 $ 51,122.0 $ 60,420.0 $ 58,437.0 $ 58,437.0
COGS $ 3,002.0 $ 3,455.0 $ 5,191.0 $ 5,686.0 $ 6,716.0 $ 6,200.0 $ 7,650.0 $ 10,693.0 $ 11,598.0 $ 12,155.0 $ 12,155.0
COGS (%) 13.1% 13.7% 18.3% 17.7% 18.2% 15.6% 17.3% 20.9% 19.2% 20.8% 20.8%

Gross Profit $ 19,954.0 $ 21,841.0 $ 23,174.0 $ 26,501.0 $ 30,119.0 $ 33,588.0 $ 36,632.0 $ 40,429.0 $ 48,822.0 $ 46,282.0 $ 46,282.0

Gross Profit (%) 86.9% 86.3% 81.7% 82.3% 81.8% 84.4% 82.7% 79.1% 80.8% 79.2% 79.2%

Operating Expenses
SG&A $ 5,150.0 $ 5,742.0 $ 6,957.0 $ 8,625.0 $ 13,306.0 $ 12,843.0 $ 13,576.0 $ 14,784.0 $ 18,166.0 $ 16,909.0 $ 16,909.0
SG&A (%) 22.4% 22.7% 24.5% 26.8% 36.1% 32.3% 30.7% 28.9% 30.1% 28.9% 28.9%
R&D $ 3,775.0 $ 4,379.0 $ 4,307.0 $ 4,659.0 $ 7,779.0 $ 6,184.0 $ 6,584.0 $ 7,121.0 $ 8,164.0 $ 9,010.0 $ 9,010.0
R&D (%) 16.4% 17.3% 15.2% 14.5% 21.1% 15.5% 14.9% 13.9% 13.5% 15.4% 15.4%
Other $ 92.0 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Other (%) 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Operating Income $ 10,937.0 $ 11,720.0 $ 11,910.0 $ 13,217.0 $ 9,034.0 $ 14,561.0 $ 16,472.0 $ 18,524.0 $ 22,492.0 $ 20,363.0 $ 20,363.0

Operating Income (%) 47.6% 46.3% 42.0% 41.1% 24.5% 36.6% 37.2% 36.2% 37.2% 34.8% 34.8%

Other Income and Expense

Net Int Inc & Other $ 3,338.0 $ (195.0) $ (397.0) $ 1,509.0 $ 3,162.0 $ 2,067.0 $ 1,790.0 $ 1,577.0 $ 1,322.0 $ (542.0) $ (542.0)
Earnings Before Taxes $ 14,275.0 $ 11,525.0 $ 11,513.0 $ 14,726.0 $ 12,196.0 $ 16,628.0 $ 18,262.0 $ 20,101.0 $ 23,814.0 $ 19,821.0 $ 19,821.0
Income Taxes $ 4,854.0 $ 3,804.0 $ 3,684.0 $ 4,733.0 $ 4,028.0 $ 4,374.0 $ 5,663.0 $ 6,036.0 $ 6,133.0 $ 5,252.0 $ 5,252.0
Tax Rate % 34.0% 33.0% 32.0% 32.1% 33.0% 26.3% 31.0% 30.0% 25.8% 26.5% 26.5%
Earnings After Taxes $ 9,421.0 $ 7,721.0 $ 7,829.0 $ 9,993.0 $ 8,168.0 $ 12,254.0 $ 12,599.0 $ 14,065.0 $ 17,681.0 $ 14,569.0 $ 14,569.0
Acctg Changes $ - $ (375.0) $ - $ - $ - $ - $ - $ - $ - $ - $ -
Disc Operations $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Ext Items $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Net Income $ 9,421.0 $ 7,346.0 $ 7,829.0 $ 9,993.0 $ 8,168.0 $ 12,254.0 $ 12,599.0 $ 14,065.0 $ 17,681.0 $ 14,569.0 $ 14,569.0
Net Income (%) 41.0% 29.0% 27.6% 31.0% 22.2% 30.8% 28.5% 27.5% 29.3% 24.9% 24.9%
Diluted EPS, Cont Ops$ $ 0.9 $ 0.7 $ 0.7 $ 0.9 $ 0.8 $ 1.1 $ 1.2 $ 1.4 $ 1.9 $ 1.6 $ 1.6
Diluted EPS$ $ 0.9 $ 0.7 $ 0.7 $ 0.9 $ 0.8 $ 1.1 $ 1.2 $ 1.4 $ 1.9 $ 1.6 $ 1.6
Shares 11072 11148 11106 10882 10894 10906 10531 9886 9470 8996 8910

Balance Sheet

Assets
Cash and Equiv $ 4,846.0 $ 3,922.0 $ 3,016.0 $ 6,438.0 $ 15,982.0 $ 4,851.0 $ 6,714.0 $ 6,111.0 $ 10,339.0 $ 6,076.0 $ 6,076.0
Short-Term Investments $ 18,952.0 $ 27,678.0 $ 35,636.0 $ 42,610.0 $ 44,610.0 $ 32,900.0 $ 27,447.0 $ 17,300.0 $ 13,323.0 $ 25,371.0 $ 25,371.0
Accts Rec $ 3,250.0 $ 3,671.0 $ 5,129.0 $ 5,196.0 $ 5,890.0 $ 7,180.0 $ 9,316.0 $ 11,338.0 $ 13,589.0 $ 11,192.0 $ 11,192.0
Inventory $ - $ - $ 673.0 $ 640.0 $ 421.0 $ 491.0 $ 1,478.0 $ 1,127.0 $ 985.0 $ 717.0 $ 717.0
Other Current Assets $ 3,260.0 $ 4,366.0 $ 4,122.0 $ 4,089.0 $ 3,663.0 $ 3,315.0 $ 4,055.0 $ 4,292.0 $ 5,006.0 $ 5,924.0 $ 5,924.0

Total Current Assets $ 30,308.0 $ 39,637.0 $ 48,576.0 $ 58,973.0 $ 70,566.0 $ 48,737.0 $ 49,010.0 $ 40,168.0 $ 43,242.0 $ 49,280.0 $ 49,280.0
Net PP&E $ 1,903.0 $ 2,309.0 $ 2,268.0 $ 2,223.0 $ 2,326.0 $ 2,346.0 $ 3,044.0 $ 4,350.0 $ 6,242.0 $ 7,535.0 $ 7,535.0
Intangibles $ - $ - $ 1,669.0 $ 3,512.0 $ 3,684.0 $ 3,808.0 $ 4,405.0 $ 5,638.0 $ 14,081.0 $ 14,262.0 $ 14,262.0
Other Long-Term Assets $ 19,939.0 $ 17,311.0 $ 15,133.0 $ 14,863.0 $ 15,813.0 $ 15,924.0 $ 13,138.0 $ 13,015.0 $ 9,228.0 $ 6,811.0 $ 6,811.0

Total Assets $ 52,150.0 $ 59,257.0 $ 67,646.0 $ 79,571.0 $ 92,389.0 $ 70,815.0 $ 69,597.0 $ 63,171.0 $ 72,793.0 $ 77,888.0 $ 77,888.0

Liabilities & Stockholders' Equity

Accts Payable $ 1,083.0 $ 1,188.0 $ 1,208.0 $ 1,573.0 $ 1,717.0 $ 2,086.0 $ 2,909.0 $ 3,247.0 $ 4,034.0 $ 3,324.0 $ 3,324.0
Short-Term Debt $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 2,000.0 $ 2,000.0
Taxes Payable $ 585.0 $ 1,468.0 $ 2,022.0 $ 2,044.0 $ 3,478.0 $ 2,020.0 $ 1,557.0 $ 1,040.0 $ 3,248.0 $ 725.0 $ 725.0
Accrued Liabilities $ 557.0 $ 742.0 $ 7,065.0 $ 8,641.0 $ 7,853.0 $ 9,164.0 $ 11,076.0 $ 2,325.0 $ 2,934.0 $ 3,156.0 $ 3,156.0
Other Short-Term
Liabilities $ 7,530.0 $ 7,734.0 $ 2,449.0 $ 1,716.0 $ 1,921.0 $ 3,607.0 $ 6,900.0 $ 17,142.0 $ 19,670.0 $ 17,829.0 $ 17,829.0

Total Current Liabilities $ 9,755.0 $ 11,132.0 $ 12,744.0 $ 13,974.0 $ 14,969.0 $ 16,877.0 $ 22,442.0 $ 23,754.0 $ 29,886.0 $ 27,034.0 $ 27,034.0
Long-Term Debt $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 3,746.0 $ 3,746.0
Other Long-Term
Liabilities $ 1,027.0 $ 836.0 $ 2,722.0 $ 4,577.0 $ 2,595.0 $ 5,823.0 $ 7,051.0 $ 8,320.0 $ 6,621.0 $ 7,550.0 $ 7,550.0

Total Liabilities $ 10,782.0 $ 11,968.0 $ 15,466.0 $ 18,551.0 $ 17,564.0 $ 22,700.0 $ 29,493.0 $ 32,074.0 $ 36,507.0 $ 38,330.0 $ 38,330.0
Total Equity $ 41,368.0 $ 47,289.0 $ 52,180.0 $ 61,020.0 $ 74,825.0 $ 48,115.0 $ 40,104.0 $ 31,097.0 $ 36,286.0 $ 39,558.0 $ 39,558.0

Total Liabilities & Equity $ 52,150.0 $ 59,257.0 $ 67,646.0 $ 79,571.0 $ 92,389.0 $ 70,815.0 $ 69,597.0 $ 63,171.0 $ 72,793.0 $ 77,888.0 $ 77,888.0
Cash Flows Statement

Cash Flows From Operating Activities

Net Income $ 9,421.0 $ 7,346.0 $ 7,829.0 $ 9,993.0 $ 8,168.0 $ 12,254.0 $ 12,599.0 $ 14,065.0 $ 17,681.0 $ 14,569.0 $ 14,569.0
Depr & Amort $ 748.0 $ 1,536.0 $ 1,084.0 $ 1,439.0 $ 1,186.0 $ 855.0 $ 903.0 $ 1,440.0 $ 2,056.0 $ 2,562.0 $ 2,562.0
Deferred Taxes $ - $ (420.0) $ (416.0) $ 336.0 $ (1,479.0) $ (179.0) $ 219.0 $ 421.0 $ 935.0 $ 762.0 $ 762.0
Other $ 3,792.0 $ 4,960.0 $ 6,012.0 $ 4,029.0 $ 6,751.0 $ 3,675.0 $ 683.0 $ 1,870.0 $ 940.0 $ 1,144.0 $ 1,144.0

Cash from Operations $ 13,961.0 $ 13,422.0 $ 14,509.0 $ 15,797.0 $ 14,626.0 $ 16,605.0 $ 14,404.0 $ 17,796.0 $ 21,612.0 $ 19,037.0 $ 19,037.0

Cash Flows From Investing Activities

Cap Ex $ (879.0) $ (1,103.0) $ (770.0) $ (891.0) $ (1,109.0) $ (812.0) $ (1,578.0) $ (2,264.0) $ (3,182.0) $ (3,119.0) $ (3,119.0)
Purchase of Business $ - $ - $ - $ (1,063.0) $ (4.0) $ (207.0) $ (649.0) $ (1,150.0) $ (8,053.0) $ (868.0) $ (868.0)
Other $ (11,048.0) $ (7,631.0) $ (10,075.0) $ (5,259.0) $ (1,632.0) $ 16,046.0 $ 10,230.0 $ 9,503.0 $ 6,648.0 $ (11,783.0) $ (11,783.0)

Cash from Investing $ (11,927.0) $ (8,734.0) $ (10,845.0) $ (7,213.0) $ (2,745.0) $ 15,027.0 $ 8,003.0 $ 6,089.0 $ (4,587.0) $ (15,770.0) $ (15,770.0)

Cash Flows From Financing Activities

Net Issuance of Stock $ (2,651.0) $ (4,454.0) $ (4,572.0) $ (4,366.0) $ (635.0) $ (4,948.0) $ (17,106.0) $ (20,793.0) $ (9,039.0) $ (8,722.0) $ (8,722.0)
Net Issuance of Debt $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 5,974.0 $ 5,974.0
Dividends $ (13.0) $ - $ - $ (857.0) $ (1,729.0) $ (36,112.0) $ (3,545.0) $ (3,805.0) $ (4,015.0) $ (4,468.0) $ (4,468.0)
Other $ 472.0 $ (1,132.0) $ - $ - $ - $ (18.0) $ 89.0 $ 54.0 $ 120.0 $ (247.0) $ (247.0)

Cash from Financing $ (2,192.0) $ (5,586.0) $ (4,572.0) $ (5,223.0) $ (2,364.0) $ (41,078.0) $ (20,562.0) $ (24,544.0) $ (12,934.0) $ (7,463.0) $ (7,463.0)
Currency Adj $ 29.0 $ (26.0) $ 2.0 $ 61.0 $ 27.0 $ (7.0) $ 18.0 $ 56.0 $ 137.0 $ (67.0) $ (67.0)
Change in Cash $ (158.0) $ (898.0) $ (908.0) $ 3,361.0 $ 9,517.0 $ (9,446.0) $ 1,845.0 $ (659.0) $ 4,228.0 $ (4,263.0) $ (4,263.0)

Free Cash Flow

Cash from Operations $ 13,961.0 $ 13,422.0 $ 14,509.0 $ 15,797.0 $ 14,626.0 $ 16,605.0 $ 14,404.0 $ 17,796.0 $ 21,612.0 $ 19,037.0 $ 19,037.0
Cap Ex $ (879.0) $ (1,103.0) $ (770.0) $ (891.0) $ (1,109.0) $ (812.0) $ (1,578.0) $ (2,264.0) $ (3,182.0) $ (3,119.0) $ (3,119.0)

Free Cash Flow $ 9,290.0 $ 7,779.0 $ 8,143.0 $ 10,541.0 $ 8,245.0 $ 12,297.0 $ 11,924.0 $ 13,241.0 $ 16,555.0 $ 14,012.0 $ 14,012.0
Book Value Per Share $ 3.74 $ 4.24 $ 4.70 $ 5.61 $ 6.87 $ 4.41 $ 3.81 $ 3.15 $ 3.83 $ 4.40 $ 4.44
Company Name ticker
Microsoft Corp www.oldschoolvalue.com MSFT
9/21/2009 User Growth Figures in Millions except per share values

Desired MOS Growth Discount % Price Share Value Buy under Actual D/C % 52Wk High 52Wk Low
User Input Params
50% 9.2% 9.0% $ 25.26 $ 27.91 $ 13.95 9% $27.66 $14.87
Financial Data
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Income Sheet Data
Revenue $ 22,956.0 $ 25,296.0 $ 28,365.0 $ 32,187.0 $ 36,835.0 $ 39,788.0 $ 44,282.0 $ 51,122.0 $ 60,420.0 $ 58,437.0
Gross Profit $ 19,954.0 $ 21,841.0 $ 23,174.0 $ 26,501.0 $ 30,119.0 $ 33,588.0 $ 36,632.0 $ 40,429.0 $ 48,822.0 $ 46,282.0
Operating Income $ 10,937.0 $ 11,720.0 $ 11,910.0 $ 13,217.0 $ 9,034.0 $ 14,561.0 $ 16,472.0 $ 18,524.0 $ 22,492.0 $ 20,363.0
Net Income $ 9,421.0 $ 7,346.0 $ 7,829.0 $ 9,993.0 $ 8,168.0 $ 12,254.0 $ 12,599.0 $ 14,065.0 $ 17,681.0 $ 14,569.0
Diluted EPS $ 0.9 $ 0.7 $ 0.7 $ 0.9 $ 0.8 $ 1.1 $ 1.2 $ 1.4 $ 1.9 $ 1.6

Cash Flow Data

Cash from Operations $ 13,961.0 $ 13,422.0 $ 14,509.0 $ 15,797.0 $ 14,626.0 $ 16,605.0 $ 14,404.0 $ 17,796.0 $ 21,612.0 $ 19,037.0
Free Cash Flow $ 9,290.0 $ 7,779.0 $ 8,143.0 $ 10,541.0 $ 8,245.0 $ 12,297.0 $ 11,924.0 $ 13,241.0 $ 16,555.0 $ 14,012.0
Capex $ 879.0 $ 1,103.0 $ 770.0 $ 891.0 $ 1,109.0 $ 812.0 $ 1,578.0 $ 2,264.0 $ 3,182.0 $ 3,119.0

Balance Sheet Data

Current Assets $ 30,308.0 $ 39,637.0 $ 48,576.0 $ 58,973.0 $ 70,566.0 $ 48,737.0 $ 49,010.0 $ 40,168.0 $ 43,242.0 $ 49,280.0
Current Liabilities $ 9,755.0 $ 11,132.0 $ 12,744.0 $ 13,974.0 $ 14,969.0 $ 16,877.0 $ 22,442.0 $ 23,754.0 $ 29,886.0 $ 27,034.0
Total Liabilities $ 10,782.0 $ 11,968.0 $ 15,466.0 $ 18,551.0 $ 17,564.0 $ 22,700.0 $ 29,493.0 $ 32,074.0 $ 36,507.0 $ 38,330.0
Tangible Shareholder Equity $ 41,368.0 $ 47,289.0 $ 50,511.0 $ 57,508.0 $ 71,141.0 $ 44,307.0 $ 35,699.0 $ 25,459.0 $ 22,205.0 $ 25,296.0

Margins
Gross Margin 86.9% 86.3% 81.7% 82.3% 81.8% 84.4% 82.7% 79.1% 80.8% 79.2%
Operating Margin 47.6% 46.3% 42.0% 41.1% 24.5% 36.6% 37.2% 36.2% 37.2% 34.8%
Net Margin 41.0% 29.0% 27.6% 31.0% 22.2% 30.8% 28.5% 27.5% 29.3% 24.9%
Current Assets>1.5 times 310.7% 356.1% 381.2% 422.0% 471.4% 288.8% 218.4% 169.1% 144.7% 182.3%

Efficiency & Profitability

CROIC 21.9% 16.2% 15.3% 17.0% 11.2% 24.5% 27.9% 39.2% 57.4% 38.3%
FCF/Sales 40.5% 30.8% 28.7% 32.7% 22.4% 30.9% 26.9% 25.9% 27.4% 24.0%
Inventory Turnover 7.7 8.9 16.0 12.6 5.2 9.5 11.8 17.0
Return On Assets (ROA) 21.1% 13.2% 12.3% 13.6% 9.5% 15.0% 18.0% 21.2% 26.0% 19.3%
Retun On Equity (ROE) 27.4% 16.6% 15.7% 17.7% 12.0% 19.9% 28.6% 39.5% 52.5% 38.4%

Debt Related
Debt to Equity 26.1% 25.3% 29.6% 30.4% 23.5% 47.2% 73.5% 103.1% 100.6% 96.9%
Capitalization Ratio 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 8.7%
FCF to Debt 86.2% 65.0% 52.7% 56.8% 46.9% 54.2% 40.4% 41.3% 45.3% 36.6%

Multi-Year Performance
2000-2007 2001-2008 2002-2009 2000-2005 2001-2006 2002-2007 2003-2008 2004-2009 Median
Shareholder Equity -6.7% -10.2% -9.4% 1.4% -5.5% -12.8% -17.3% -18.7% -9.8%
Free Cash Flow 5.2% 11.4% 8.1% 5.8% 8.9% 10.2% 9.4% 11.2% 9.2%
CROIC 19.4% 20.8% 26.2% 16.6% 16.6% 20.8% 26.2% 33.1% 20.8%
FCF/Sales 29.7% 28.1% 27.2% 30.8% 29.7% 27.8% 27.2% 26.4% 27.9%
ROA 14.3% 14.3% 16.5% 13.4% 13.4% 14.3% 16.5% 18.6% 14.3%
ROE 18.8% 18.8% 24.2% 17.1% 17.1% 18.8% 24.2% 33.5% 18.8%
Revenue Growth 12.1% 13.2% 10.9% 11.6% 11.8% 12.5% 13.4% 9.7% 12.0%
Gross Margin 82.5% 82.1% 81.7% 83.4% 82.5% 82.1% 82.1% 81.3% 82.1%
Operating Margin 39.1% 37.2% 36.9% 41.5% 39.1% 36.9% 36.9% 36.4% 37.1%
Net Margin 28.7% 28.7% 28.0% 29.9% 28.7% 28.0% 28.9% 28.0% 28.7%
Earnings Growth 7.6% 16.0% 12.5% 5.7% 12.7% 14.9% 15.2% 16.7% 13.8%
Cash from Ops Growth 3.5% 7.0% 4.0% 3.5% 1.4% 4.2% 6.5% 5.4% 4.1%

Projection of future Free Cash Flow

Growing at 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
9% $ 15,299 $ 16,704 $ 18,238 $19,250.88 $20,841.94 $22,564.51 $24,429.44 $24,875.75 $26,726.11 $28,714.11
Terminal Value 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
3% $ 29,576 $ 30,463 $ 31,377 $ 32,318 $ 33,288 $ 34,286 $ 35,315 $ 36,374 $ 37,465 $ 38,589

Company Valuation Free Cash Flow and Tangible Shareholder Equity Trend
Total Value $ 248,410 $80,000.0 $71,141.0
FCF Shareholder Equity
Shares Outstanding 8901 8901 $70,000.0
$57,508.0
Per Share Value $ 27.91 $60,000.0 $50,511.0
$47,289.0
Margin of Safety 50% $50,000.0 $41,368.0 $44,307.0
Purchase Price $ 13.95 $35,699.0
$40,000.0
Current Price $ 25.26 $25,459.0 $25,296.0
$30,000.0 $22,205.0
Actual Discount 9% $16,555.0
$14,012.0
$20,000.0 $9,290.0 $7,779.0 $8,143.0 $10,541.0 $8,245.0 $12,297.0$11,924.0$13,241.0
Enterprise Value $ 200,930.00
$10,000.0
Enterprise Value/EBITDA 8.636
$-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
 Multi-Year Performance Graph
250.0%
Gross Margin Operating Margin Net Margin Earnings Growth ROA ROE

200.0% 33.5%
18.8% 24.2% 24.2%
18.8% 17.1% 17.1% 18.8%
14.3% 13.4% 14.3% 16.5% 18.6%
14.3% 16.5% 13.4%
7.6% 16.0% 5.7% 12.7% 14.9% 15.2% 16.7%
150.0% 12.5%

28.7% 29.9% 28.7%

28.7% 28.0% 28.0% 28.9% 28.0%

100.0% 39.1% 37.2% 36.9% 41.5% 39.1% 36.9% 36.9% 36.4%

50.0%
82.5% 82.1% 81.7% 83.4% 82.5% 82.1% 82.1% 81.3%

0.0%
2000-2007 2001-2008 2002-2009 2000-2005 2001-2006 2002-2007 2003-2008 2004-2009
Margin Percentages
100.0%
86.9% 86.3% 84.4%
90.0% 81.7% 82.3% 81.8% 82.7% 80.8%
79.1% 79.2%
80.0%
Gross Margin
70.0%
60.0%
47.6% 46.3%
50.0% 41.0% 42.0% 41.1%
36.6% 37.2% 36.2% 37.2% 34.8% Operating Margin
40.0% 31.0% 30.8%
29.0% 27.6% 28.5% 27.5% 29.3%
30.0% 24.5%
22.2% 24.9%

20.0%
Net Margin
10.0%
0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Efficiency & Profitability Debt

70.0% 120.0%
CROIC FCF/Sales ROA ROE Debt to Equity Capitalization Ratio FCF to Debt
60.0%
100.0%
50.0%
80.0%
40.0%
60.0%
30.0%
40.0%
20.0%

10.0% 20.0%

0.0% 0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Sales, Receivables, Inventory

$70,000.0
Sales Accts Receivable Inventory
$60,000.0

$50,000.0

$40,000.0

$30,000.0

$20,000.0

$10,000.0

$-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 TTM
Company Name ticker
Microsoft Corp MSFT
9/21/2009 www.oldschoolvalue.com Figures in Millions except per share values
Desired MOS Growth Discount % Price Share Value Buy under Actual D/C % 52Wk High 52Wk Low
50% 9.2% 9% $ 25.26 $ 27.91 $ 13.95 9% $ 27.66 $ 14.87

Historical Stock Price Vs Intrinsic Value Per Share

60
Historical Price Intrinsic Value Buy Price Linear (Historical Price)

50

40

30

20

10

0
9/28/1998 9/28/1999 9/28/2000 9/28/2001 9/28/2002 9/28/2003 9/28/2004 9/28/2005 9/28/2006 9/28/2007 9/28/2008
Company Name ticker
Microsoft Corp MSFT
9/21/2009 User Growth Figures in Millions except per share values
www.oldschoolvalue.com
Desired MOS Growth Price Actual DC% Share Value Buy under P/B Ratio Net Net Working Capital
User Input Params
66% 13.8% $ 25.26 16% $ 30.04 $ 10.21 5.74 $ 0.21

Earnings
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
$ 0.85 $ 0.66 $ 0.71 $ 0.92 $ 0.75 $ 1.12 $ 1.20 $ 1.42 $ 1.87 $ 1.62
Diluted EPS
2010 2011 2012 2013
$ 1.62 $ 1.85 $ 1.86 $ 2.15

Multi-Year Performance
2000-2005 2001-2006 2002-2007 2003-2008 2004-2009 2000-2003 2001-2004 2002-2005
Earnings Growth 5.7% 12.7% 14.9% 15.2% 16.7% 2.7% 4.4% 16.4%
EPS Weighted Average $ 0.84 $ 0.89 $ 1.02 $ 1.21 $ 1.33 $ 0.79 $ 0.76 $ 0.88
2003-2006 2004-2007 2005-2008 2006-2009 Median (1998-2007)
Earnings Growth 9.26% 23.71% 18.63% 10.52% 13.8%
EPS Weighted Average $ 1.00 $ 1.12 $ 1.40 $ 1.53 $1.01

Company Stats $2.00 $1.87 $1.85

Normal Earnings $ 1.01 $1.80 EPS Linear (EPS)
$1.62 $1.62
Expected 5 Year Growth 13.79%
$1.60 $1.42
20 yr A Corp Bond Rate 5.7
$1.40
Book Value Per Share 4.40 $1.20
$1.20 $1.12
Price to Book Ratio 5.74
$1.00 $0.92
Enterprise Value Per Share 22.57 $0.85
$0.71 $0.75
$0.80 $0.66
Company Valuation $0.60
Per Share Value $ 30.04 $0.40
Desired MOS 66.00% $0.20
Purchase Price $ 10.21 $-
Current Price $ 25.26 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Actual Discount 16%
 Old School Value | http://www.oldschoolvalue.com

Company Company
Name Name ticker
Microsoft Corp MSFT
9/21/2009 User Discount % Figures in Millions except per share values
9%
Discount Rate % EPV Net Reprod. Cost Current Price MOS % Tangible BV NNWC
9% $ 24.36 $4.63 $ 25.26 0% $ 3.09 $ 0.56
Reproduction Asset Value
Quarterly numbers based on: 2009 Q4 Data Source
Statement Source Date: 30-Jul-09 MSN
Adjust Reproduction
Assets Book Value +/- Multiplier Asset Value 2003 2004 2005 2006 2007 2008 2009 TTM
CAPEX
Cash & Equivalents $ 31,447.0 $ 31,447.0 (statements) $ 891.0 $ 1,109.0 $ 812.0 $ 1,578.0 $ 2,264.0 $ 3,182.0 $ 3,119.0 $ 3,119.0
Marketable Securities $ 25,371.0 $ 25,371.0 Last 6 yrs
Accounts Receivable - Gross $ 11,192.0 $ 11,192.0 Last 5 yrs
Other Receivable $ - $ - Last 4 yrs
Receivables $ 11,192.0 $ 11,192.0 Last 3 yrs $ 2,764.0 $ 2,770.0 $ 2,812.0 $ 3,499.0 $ 4,654.0 $ 7,024.0 $ 8,565.0 $ 9,420.0
Inventories: Raw Materials $ 170.0 Last 2 yrs $ 1,661.0 $ 2,000.0 $ 1,921.0 $ 2,390.0 $ 3,842.0 $ 5,446.0 $ 6,301.0 $ 6,238.0
Inventories: Work in Progress $ 45.0 Last 1 yr $ 891.0 $ 1,109.0 $ 812.0 $ 1,578.0 $ 2,264.0 $ 3,182.0 $ 3,119.0 $ 3,119.0
Inventories: Purchased
Components $ - PPE $ 2,223.0 $ 2,326.0 $ 2,346.0 $ 3,044.0 $ 4,350.0 $ 6,242.0 $ 7,535.0 $ 7,535.0
Inventories: Finished Goods $ 502.0 Sales $ 32,187.0 $ 36,835.0 $ 39,788.0 $ 44,282.0 $ 51,122.0 $ 60,420.0 $ 58,437.0 $ 58,437.0
Inventories: Other $ - R&D $ 4,659.0 $ 7,779.0 $ 6,184.0 $ 6,584.0 $ 7,121.0 $ 8,164.0 $ 9,010.0 $ 9,010.0
Inventories -- Total $ 717.0 $ 717.0 $10,000.0
Prepaid Expenses $ - $ -
Current Defered Income Taxes $ 2,213.0 $ 2,213.0 $9,000.0
Other Current Assets $ 5,924.0 $ 5,924.0
$8,000.0
Total Current Assets $ 51,493.0 $ 51,493.0
$7,000.0 Last 6 yrs
Goodwill, Net $ 12,503.0 50% $ 6,251.5
Intangibles, Net $ 1,759.0 $ 1,759.0 Last 5 yrs
$6,000.0
Intangibles $ 14,262.0 $ 8,010.5 Last 4 yrs
$5,000.0
Property/Plant/Equipment - Net $ 7,535.0 $ 7,535.0 Last 3 yrs
Long Term Investments $ 4,933.0 $ 4,933.0 $4,000.0
Note Receivable - Long Term $ - $ - Last 2 yrs
Other Long Term Assets, Total $ 1,878.0 $ 1,878.0 $3,000.0
Last 1 yr
Total Assets $ 80,101.0 $ 68,916.5 $2,000.0
PPE
Reproduction $1,000.0
Liabilities & Equity Book Value Corrected BV Multiplier Asset Value $-
Accounts Payable $ 3,324.0 $ 3,324.0 2003 2004 2005 2006 2007 2008 2009 TTM
Accrued Expenses $ 3,156.0 $ 3,156.0
Accrued Liabilities $ - $ - Asset Valuation Asset Valuation Data
Notes Payable/Short Term Debt $ 2,000.0 $ 2,000.0 Total Per Share Shares Outstanding 8901.0 8901
Current Port. of LT Debt/Capital Tangible BV $ 27,509 $ 3.09
Leases $ - $ - Balance Sheet Assets $ 80,101.0
Other Current Liabilities $ 18,554.0 $ 18,554.0 Adjusted BV $ 30,587 $ 3.44 Adjusted Assets $ 68,916.5
Total Current Liabilities $ 27,034.0 $ 27,034.0 NNWC $ 5,026 $ 0.56 Total Liabilities $ 38,330.0
Reprod. Cost of
Long-Term Debt $ 3,746.0 $ 3,746.0 Assets $ 104,043 $ 11.69 Total Equity $ 41,771.0
Reprod. Cost of
Capital Lease Obligations $ - $ - Assets BV $ 65,713 $ 7.38
Total Net
Deferred Income Taxes $ - $ - Reprod. Cost $ 41,181 $ 4.63 Marketing/Brand Value $ 17,631.3
Minority Interest $ - $ - R&D Value $ 17,495.2
Total Other Liabilities $ 7,550.0 $ 7,550.0
Total Liabilities $ 38,330.0 $ 38,330.0 Cash Needed for Business $ 584.4
Common Stock Equity $ 39,558.0 $ 39,558.0 Interest Bearing Debt $ 5,746.0
Retained Earnings $ (22,824.0) $ (22,824.0) Non Interest Bearing Debt $ 32,584.0
Total Capitalization $ 43,304.0 $ 43,304.0 Excess Cash $ 30,278.3
Total Equity $ 39,558.0 $ 41,771.0
Total Liabilities & Stock Equity $ 77,888.0 $ 77,888.0
 Old School Value | http://www.oldschoolvalue.com

Earnings Power Value (EPV)

5 Year Annual Data Past 4 Quarterly Data

Period End Date 30-Jun-05 30-Jun-06 30-Jun-07 30-Jun-08 30-Jun-09 30-Sep-08 31-Dec-08 31-Mar-09 30-Jun-09
Period Length 12 Months 12 Months 12 Months 12 Months 12 Months 3 Months 3 Months 3 Months 3 Months
Statement Source 10-K 10-K 10-K 10-K 10-K 10-Q 10-Q 10-Q 10-K

Income Statement 2005 2006 2007 2008 2009 2009 Q1 2009 Q2 2009 Q3 2009 Q4 TTM User Input
Sales $ 39,788 $ 44,282 $ 51,122 $ 60,420 $ 58,437 $15,061.0 $ 16,629.0 $ 13,648.0 $ 13,099.0 $ 58,437.0
EBIT $ 16,628.0 $ 18,262.0 $ 20,101.0 $ 23,814.0 $ 19,821.0 $5,927.0 $5,690.0 $3,999.0 $3,937.0
$ 19,553.0
Add back one time charges
EBIT Margin 41.8% 41.2% 39.3% 39.4% 33.9% 39.4% 34.2% 29.3% 30.1% 33.5%
EBIT at user defined % of sales $ -
EBIT User Defined % Margin 41.8% 41.2% 39.3% 39.4% 33.9% 39.4% 34.2% 29.3% 30.1% 33.5%
Normalized EBITDA $ 17,755.0 $ 18,782.0 $ 19,874.0 $ 24,143.0 $ 22,984.0 $6,584.0 $ 6,571.0 $ 5,392.0 $ 4,708.0 $ 23,255.0
Normalized EBIT $ 16,871.0 $ 17,792.0 $ 18,438.0 $ 22,271.0 $ 20,693.0 $5,999.0 $ 5,939.0 $ 4,728.0 $ 4,027.0 $ 20,693.0
SG&A $ 2,697.3 $ 3,064.0 $ 3,717.5 $ 4,596.8 $ 4,144.8 $982.8 $ 982.8 $ 1,123.3 $ 973.5 $ 4,062.3
R&D $ 1,524.3 $ 1,646.0 $ 1,780.3 $ 2,041.0 $ 2,252.5 $570.8 $ 570.8 $ 572.5 $ 553.0 $ 2,267.0

Adjusted EBIT $ 20,849.5 $ 22,972.0 $ 25,598.8 $ 30,451.8 $ 26,218.3 $7,480.5 $ 7,243.5 $ 5,694.8 $ 5,463.5 $ 25,882.3
Adjusted EBIT % 52.4% 51.9% 50.1% 50.4% 44.9% 49.7% 43.6% 41.7% 41.7% 44.3%

Income Before Tax $ 16,628.0 $ 18,262.0 $ 20,101.0 $ 23,814.0 $ 19,821.0 $5,927.0 $ 5,690.0 $ 3,999.0 $ 3,937.0 $ 19,553.0
Income Tax - Total $ 4,374.0 $ 5,663.0 $ 6,036.0 $ 6,133.0 $ 5,252.0 $1,618.0 $ 1,464.0 $ 1,073.0 $ 1,097.0 $ 5,252.0
Tax Rate 26.3% 31.0% 30.0% 25.8% 26.5% 27.3% 25.7% 26.8% 27.9% 26.9%

Adjusted Earnings After tax $ 15,365.0 $ 15,848.4 $ 17,911.9 $ 22,609.3 $ 19,271.2 $5,438.4 $ 5,379.79 $ 4,166.75 $ 3,941.16 $ 18,926.1
Depreciation & Amortization $ 884.0 $ 990.0 $ 1,436.0 $ 1,872.0 $ 2,291.0 $585.0 $ 632.0 $ 664.0 $ 681.0 $ 2,562.0
Add user defined % of D&A $ 176.8 $ 198.0 $ 287.2 $ 374.4 $ 458.2 $117.0 $ 126.4 $ 132.8 $ 136.2 $ 512.4

Income as Adjusted $ 15,541.8 $ 16,046.4 $ 18,199.1 $ 22,983.7 $ 19,729.4 $5,555.4 $ 5,506.2 $ 4,299.6 $ 4,077.4 $ 19,438.5
Income as Adjusted % 39.1% 36.2% 35.6% 38.0% 33.8% 36.9% 33.1% 31.5% 31.1% 33.3%
Operating Income as Reported $ 14,561.0 $ 16,472.0 $ 18,524.0 $ 22,492.0 $ 20,363.0 $5,927.0 $ 5,677.0 $ 4,018.0 $ 3,987.0 $ 19,609.0

2005 2006 2007 2008 2009 TTM Average

PPE as a % of Sales 5.9% 6.9% 8.5% 10.3% 12.9% 12.9%
Sales Growth (decrease) to Prior
Year $ 2,953.0 $ 4,494.0 $ 6,840.0 $ 9,298.0 $ (1,983.0) $ -
Capex $ 812.0 $ 1,578.0 $ 2,264.0 $ 3,182.0 $ 3,119.0 $ 3,119.0 $ 2,191.0
Maintenance Capex $ 637.9 $ 1,269.1 $ 1,682.0 $ 2,221.4 $ 3,119.0 $ 3,119.0 $ 2,008.1
Depr & Amort $ 855.0 $ 903.0 $ 1,440.0 $ 2,056.0 $ 2,562.0 $ 2,562.0 $ 1,729.7

2005-2006 2006-2007 2007-2008 2008-2009 2009-TTM Normalized Adjusted Income Possible Values for Override Box
3.2% 13.4% 26.3% -14.2% -1.5% Normalized Income $ 19,259.5
$ 15,794.1 $ 17,122.8 $ 20,591.4 $ 21,356.5 $ 19,583.9 Avg Adj. Income 5 yrs $ 18,500.1
TTM Adjusted Income $ 19,438.5
$19,259.5
2005-2007 2006-2008 2007-2009 2008-TTM
8.2% 19.7% 4.1% -8.0% EPV Data
Multiyear Timeframe Adjusted $ 16,595.8 $ 19,076.4 $ 20,304.0 $ 20,717.2 Cost of Capital 9%
Income & Growth Normalized Adjusted Income $ 19,259.5
2005-2008 2006-2009 2007-TTM Normal. Adj. Income Growth Average Maintenance Capex $ 2,008.1
12.7% 2.7% -5.4% 4.5% Interest Bearing Debt $ 5,746
$ 18,192.8 $ 19,239.6 $ 20,087.7 1% of sales $ 584.37
Cash & Equiv $ 31,447
2005-2009 2006-TTM Cash - Debt $ 25,116.63
6.1% 4.9% Shares 8901
$ 18,500.1 $ 19,279.4

+Cash-Debt
Cost of Capital Rates EPV Per Share Adjustment Per Share
5% $ 345,029.3 $ 38.76 $ 370,145.9 $ 41.58
7% $ 246,449.5 $ 27.69 $ 271,566.1 $ 30.51
9% $ 191,682.9 $ 21.53 $ 216,799.6 $ 24.36
11% $ 156,831.5 $ 17.62 $ 181,948.1 $ 20.44
13% $ 132,703.6 $ 14.91 $ 157,820.2 $ 17.73
Company Name ticker
Microsoft Corp MSFT
9/21/2009 Enter Competitor Tickers Into Boxes Below all figures in $Mil
MSFT Industry Ranking
Stock Price 25.26 NA NA
Market Cap (millions) 225,080 NA NA
52-Week High 27.66 NA NA
52-Week Low 14.87 NA NA
% off 52-Week Low 69.9% NA NA

Valuation Ratios
P/E Ratio (TTM) 15.59 15.1 1
Price to Sales (TTM) 3.85 0.76 1
Price to Book (MRQ) 5.69 3.49 1
Price to Tangible Book (MRQ) 8.9 7.89 1
Price to Cash Flow (TTM) 13.14 4.79 1
Price to Free Cash Flow (TTM) 19.66 17.56 1
Enterprise Value/Revenue (TTM) 3.44 NA NA
Enterprise Value/EBITDA (TTM) 8.636 NA NA

Dividends
Dividend Yield 2.06 0.13 1
Dividend Yield - 5 Year Avg. 3.96 1.94 1
Dividend 5 Year Growth Rate 26.58 14.58 1
Payout Ratio (TTM) 31.71 31.97 1

Growth Rates
Sales (MRQ) vs Qtr. 1 Yr. Ago -17.29 -9.37 1
Sales (TTM) vs TTM 1 Yr. Ago 3.85 0.76 1
Sales - 5 Yr. Growth Rate 9.67 9.17 1
EPS (MRQ) vs Qtr. 1 Yr. Ago -25.55 -0.57 1
EPS (TTM) vs TTM 1 Yr. Ago -13.36 0 1
EPS - 5 Yr. Growth Rate 16.65 3.21 1
Capital Spending - 5 Yr. Growth Rate 22.98 29.2 1

Financial Strength
Quick Ratio (MRQ) 1.8 2.31 1
Current Ratio (MRQ) 1.82 2.48 1
LT Debt to Equity (MRQ) 9.47 12.48 1
Total Debt to Equity (MRQ) 14.53 18.85 1

Profitability
Gross Margin (TTM) 79.2 16.86 1
Gross Margin - 5 Yr. Avg. 81.06 53.89 1
EBITD Margin (TTM) 37.94 0 1
EBITD - 5 Yr. Avg. 38.98 24.86 1
Operating Margin (TTM) 33.56 4.49 1
Operating Margin - 5 Yr. Avg. 36.03 20.67 1
Pre-Tax Margin (TTM) 33.92 4.22 1
Pre-Tax Margin - 5 Yr. Avg. 38.82 21.88 1
Net Profit Margin (TTM) 24.93 2.82 1
Net Profit Margin - 5 Yr. Avg. 28.01 13.27 1

Management Effectiveness
Return On Assets (TTM) 19.34 2.16 1
Return On Assets - 5 Yr. Avg. 19.63 9.83 1
Return On Investment (TTM) 31.08 3.17 1
Return On Investment - 5 Yr Avg 28.63 14.41 1
Return On Equity (TTM) 38.42 3.84 1
Return On Equity - 5 Yr. Avg. 33.44 15.86 1

Efficiency
Revenue/Employee (TTM) 628355 11774941 NA
Net Income/Employee (TTM) 156656 348136 NA
Receivable Turnover (TTM) 4.72 2.83 NA
Inventory Turnover (TTM) 14.28 3.32 NA
Asset Turnover (TTM) 0.78 0.3 1
Company Name ticker
Microsoft Corp www.oldschoolvalue.com MSFT
9/21/2009 Figures in Millions except per share values

Net Profit Margin Cash Flow (Continuing Operations)

41% 21612
19037
17796
31% 31% 16462 16605 15797
29% 28% 28% 28% 29% 14404 14626 14509 13961
25% 25% 13422
22%

TTM 2009/06 2008/06 2007/06 2006/06 2005/06 2004/06 2003/06 2002/06 2001/06 2000/06 TTM 2009/06 2008/06 2007/06 2006/06 2005/06 2004/06 2003/06 2002/06 2001/06 2000/06
25% 25% 29% 28% 28% 31% 22% 31% 28% 29% 41% 16462 19037 21612 17796 14404 16605 14626 15797 14509 13422 13961
% Change -14.8% 6.4% -3.3% -7.6% 38.9% -28.6% 12.5% -5.0% -29.2% -- % Change -11.9% 21.4% 23.5% -13.3% 13.5% -7.4% 8.9% 8.1% -3.9% --

Magic Formula Investing -- Return on Capital Magic Formula Investing -- Earnings Yield
0.82 12.4% 11.9%
0.72 11.5%
0.59 0.59 9.0%
7.8% 7.7% 7.2%
0.47 0.46 7.1%
0.38 0.39 5.5%
0.29 0.32 4.6% 3.9%
0.16

Now 2009/06 2008/06 2007/06 2006/06 2005/06 2004/06 2003/06 2002/06 2001/06 2000/06 Now 2009/06 2008/06 2007/06 2006/06 2005/06 2004/06 2003/06 2002/06 2001/06 2000/06
0.59 0.59 0.82 0.72 0.47 0.38 0.16 0.29 0.32 0.39 0.46 11.5% 12.4% 11.9% 7.8% 9.0% 7.1% 5.5% 7.7% 7.2% 4.6% 3.9%
% Change -28.4% 14.1% 54.0% 21.5% 136.7% -43.2% -10.0% -18.8% -14.7% -- % Change 3.9% 52.9% -13.7% 27.9% 28.4% -28.9% 6.7% 58.0% 17.1% --

Return on Assets (ROA) Return on Equity (ROE)

24% 48.7%
22% 45.2%
19% 19% 18% 18% 36.8% 36.8%
17%
31.4%
13% 13% 25.5%
12% 22.8%
9% 16.4% 16.3%
15.0%
10.9%

2009/06 2009/06 2008/06 2007/06 2006/06 2005/06 2004/06 2003/06 2002/06 2001/06 2000/06 2009/06 2009/06 2008/06 2007/06 2006/06 2005/06 2004/06 2003/06 2002/06 2001/06 2000/06
19% 19% 24% 22% 18% 17% 9% 13% 12% 13% 18% 36.8% 36.8% 48.7% 45.2% 31.4% 25.5% 10.9% 16.4% 15.0% 16.3% 22.8%
% Change -23.0% 9.0% 23.2% 4.6% 96.6% -30.2% 8.6% -10.8% -28.2% -- % Change -24.4% 7.7% 43.9% 23.1% 133.9% -33.5% 9.3% -8.0% -28.5% --

Current Ratio Quick Ratio

4.7 4.2 4.7 4.2
3.8 3.8
3.6 3.6
2.9 3.1 3.1
2.9
2.2 2.1
1.8 1.8 1.7 1.8 1.8 1.6
1.4 1.4

2009/06 2009/06 2008/06 2007/06 2006/06 2005/06 2004/06 2003/06 2002/06 2001/06 2000/06 2009/06 2009/06 2008/06 2007/06 2006/06 2005/06 2004/06 2003/06 2002/06 2001/06 2000/06
1.8 1.8 1.4 1.7 2.2 2.9 4.7 4.2 3.8 3.6 3.1 1.8 1.8 1.4 1.6 2.1 2.9 4.7 4.2 3.8 3.6 3.1
% Change 26.0% -14.4% -22.6% -24.4% -38.7% 11.7% 10.7% 7.1% 14.6% -- % Change 27.0% -14.0% -22.4% -25.9% -39.0% 12.3% 11.1% 5.6% 14.6% --
Company Name ticker
Microsoft Corp MSFT
9/21/2009 www.oldschoolvalue.com Figures in Millions except per share values

Company Assessment: Quantitative

Valuation Criteria over 10yrs Value Points User Points

> 25% or 50% depending on
DCF Valuation Discount 9% 0
moat
Graham Intrinsic Value Discount > 66% 16% 0

Margins, Profit and Growth Criteria over 10yrs Value Points User Points
Median Revenue growth 10% 12.0% 1
Median Gross Margin 30% 82.1% 2
Median Operating Margin 15% 37.1% 2
Median Net Margin 10% 28.7% 2
Median EPS growth 10% 13.8% 1

Business and Management Performance Criteria over 10yrs Value Points User Points
Cash growth from Operations 15% 4.1% 0
CROIC is postive and capable of paying off financing 13% 20.8% 2
Median FCF growth positive and consistent 10% 9.2% 0
Median FCF/Sales 7% 27.9% 2
Consistent ROE (manually check) Consistent over 10yrs N/A N/A
Consistent ROA (manually check) Consistent over 10yrs N/A N/A

Balance Sheet Criteria for TTM Value Points User Points

Current assets > 1.5 x current liabilities > 1.5 x current liabilities 1.8 1
Price to Book ratio < 2 N/A 5.74 N/A N/A
Debt to Equity < 100% 96.9% 1
FCF to Debt > 10% 36.6% 2
Capitalization Ratio < 30% 9% 2
Intangibles % of assets < 15% of assets 18.3% 0

Company Assessment: Qualitative

Microsoft Corporation is engaged in developing, manufacturing, licensing, and supporting a range of software products and services for
different types of computing devices. The Company operates in five business segments: Client, Server and Tools, Online Services
Business, Microsoft Business Division, and Entertainment and Devices Division. The software products and services include operating
systems for servers, personal computers, and intelligent devices; server applications for distributed computing environments;
information worker productivity applications; business solutions applications; computing applications; software development tools, and
video games. The Company provide consulting and product and solution support services, and trains and certifies computer system
integrators and developers. It also designs and sells hardware, including Xbox 360 video game console, the Zune digital music and
entertainment device, and peripherals.

Competitive Advantage Comment User Points Max Points

Stable market share? max 2
Dominant company in industry, segment? max 2
Low barriers to entry and exit? max 2
Experience goods (brand effect, trademarks) max 2
High switching costs? max 2
Network effect? E.g. eBay max 2

Business Model Comment User Points Max Points

Growth due to:
a) Yes
a) existing product / existing market (yes/no)
b) Yes
b) existing product / new market (yes/no) max 2
c) Yes
c) new product / existing market (yes/no)
d) No
d) new product / new market (yes/no)
Able to increase prices and retain customers? max 1
Compete on price? (1 for no, 0 for yes) max 1
Barriers of entry to the business? max 1
Diverse customers? (1 for diverse, 0 for concentrated) max 1
Involved in competition? Monopoly, duopoly, crowded max 2
Company has a recurring revenue stream? max 1
Capital intensive company? (1 for no, 0 for yes) max 1
Management Comment User Points Max Points
High insider ownership? max 1
Candid management on positives and negatives? max 1
Management performance at previous jobs? max 1
Compensation levels compared to sales? max 1

Industry Comment User Points Max Points

Boring industry? (1 for slow, 0 for fast industry) max 1
Can company adapt to changing industry environment? max 1
Industry leader or lagger? (1 for leader, 0 for lagger) max 1

Psychological Factors to Consider. Not Weighted. Comment

Recency bias? no
Hindsight bias? no
Framing issues correctly and in different manners? DCF, graham, compare to peers
Is there a data framing bias? maybe
Am I too overconfident on the situation? no
Performed probability analysis for -ve factors? no
Too much loss aversion? no
Sunk cost mentality? no
Slow in changing opinion? no
Psychological denial ? no
Bias from commitment and consistency tendency? no
Pavlovian association? no
Social proof bias? no
Status quo bias? no
False consensus bias? no
Do I have an exit plan?

Category Total Points out of 5

Valuation 0.0
Margins, Profit and Growth 4.0
Business and Management Performance 2.0
Balance Sheet 3.0
Competitive Advantage 0.0
Business Model 0.0
Management 0.0

Low Risk High Growth Under Valued Well Managed Good Financial Health Strong Moat
3.7 2.0 2.5 3.5 3.5 4.0
3.7 2.0 2.5 3.5 3.5 4.0

Low Risk
5.0

4.0

3.0
Strong Moat High Growth
2.0

1.0

0.0

Good Financial Health Under Valued

Well Managed