By the numbers
Here's some data from MorningStar which may be difficult to read and can be found here:
This first table details overall profitability. Reviewing the numbers and in particular comparing the period '00 (the year Ballmer took over as CEO) to '05, things that jump out include a good job keeping gross margins stratospheric (83.7% vs 86.9%), but a whopping 44% increase in SG&A which has contributed to a 24% decrease in operating margin . The trend in both did improve materially in '05 vs '04, but the net result is a company that is far less profitable today on a net basis that it was in '00. This is key, and completely at odds with Gates' further statement yesterday that MSFT "had doubled sales and profits" during that period. Sales, yes. Profit, at least on a net basis, not even close.
This second table details growth rates. In addition to the massive slowdown in revenue growth that we're all aware of, note the lack of consistency in either operating income and - critical to the stock - EPS. Once again, '05 brought some promising improvement in raw numbers, but based on next year's surprise spending plans, we'll once again see a huge variable move down in EPS growth.
If you're wondering how this compares to MSFT's peers, here's the first one I pulled - SAP:
Looking at the period '00 - '05, we have gross margin up 8.5%, and operating margin up a whopping 53%. I guess their CEO must have done a "super fantastic" job.