1.SalesDue to the recent launch of new products, such as Windows Vista and Microsoft Office 2007, higher growth rates are predicted for 2007 and 2008. The sales growth rate for the next two years is also very close to some analysts' estimates. From 2008 to 2010, Microsoft will have no significant product going into the market, as Microsoft has just launched a big numbers of products in 2006 and 2007, including X-box, Zune, Windows Vista, etc. In addition, the competition in the high-tech industry will drive down the sales growth rate to 8% in these three years. Besides, as Microsoft's profit mostly comes from Operating system products, we expect them to launch a new version of Windows in 5 years from now. Therefore, their sales might increase significantly in 2012.
2. Cost of Goods SoldIn recent years, COGS has averaged about 17.92% of sales. The reciprocal of this ratio, or the inventory turnover ratio, indicates that average sales are 5.58
times inventory. In other words, Microsoft puts 17.92 cents in inventory to get one dollar of sales. This is not so good in comparison to the performance of the industry. According to Hoovers, the turnover ratio of the industry is about 12.9, a lot higher than that of Microsoft. Therefore, we predict that Microsoft will make some changes to be more efficient. In other words, Microsoft will decrease their COGS/Sales ratio slightly over year. They will not be able to decrease the ratio significantly, because of the nature of their high-tech product.
3. Research and DevelopmentR&D/Sales dropped from about 20% to about 15% in 2005, and had remained low. Quarterly information also implies R&D/Sales close to 14% in 2007. After the launch of new products in 2006 and 2007, Microsoft will put more money in the research and development...