IBM vs. Microsoft Comparison Between IBM and Microsoft

How different corporate emphasis upon hardware vs. software affects accounting practices and financial records

IBM and Microsoft are two technological behemoths. Both companies have been criticized for de facto and de jure monopolistic practices within the software industry at different junctures of their corporation's life. However, from a financial and an accounting standpoint, both companies have distinctively different strengths as well as have exhibited distinct differences in their financial structure, organization, and yes, investor public relations. Microsoft's emphasis on software has led to its stress upon encouraging individual education and familiarity with its web-based and software systems. IBM's need to purvey its hardware has resulted in more conservative advertising and inventory strategies, as well as more outreach to businesses rather than individuals, where depreciation of hardware goods can generate additional profits for the company.

The Microsoft Corporation is currently the more successful and the younger of the two companies. Microsoft currently, in contrast to IBM, is primarily known for its software capacities, rather than IBM's stress upon selling hardware. According to MSN Money, Microsoft "develops, manufactures, licenses and supports a wide range of software products for various computing devices." (MSN, 2004) The hardware/software emphasis of a company is important when understanding its financial base, as software is more dependant upon selling wide amounts of the service to a variety of sources, encouraging long-standing service use as well as simple purchasing of its products. This ensures that, regardless of hardware depreciation, different users may be 'locked into' Microsoft's proprietary software networks. Thus, Microsoft places a great financial emphasis on education, not only out of generosity, but also encourage to company profits. Rather than in terms of selling the maximum amount of general, tangible goods possible, the more people know how to use Microsoft, the better the service will perform financially, as more people will wish to utilize the software and update the software sold.

The Microsoft Company's software products "include scalable operating systems...

This aspect of generating revenue has been amongst the company's greatest strengths. By encouraging more individuals to 'tap into' Microsoft's capabilities as a software provider it has integrated more and more individuals into the Microsoft network.
Another key component of Microsoft's financial statements is the stress the company places upon its Internet access and service providing capacity. Although the inclusion of Netscape Navigator has incurred legal charges of monopolistic practices for the company, the 'connectedness' of the Microsoft network has been a substantial source of revenue for the company as well. Microsoft has also incurred profits through the use of this Internet accessing aspect of its company by including updates for its software upon the web, a frequent necessity for surfers and particularly young web savvy consumers who frequently share files and thus run the risk of exposing their systems to viruses, and who need the most technologically forward technology to use the web as they desire.

The Microsoft Company is not entirely software based. It has also solidified its image as a young company by selling its Xbox video game console, along with games and peripherals, creating an additional hardware component to its success. "Its online businesses include the MSN subscription and the MSN network of Internet products and services. The Company's seven product segments are: Client, Server and Tools, Information Worker, Microsoft Business Solutions, MSN, Mobile and Embedded Devices and Home and Entertainment." (MSN, 2004)

In contrast to Microsoft's emphasis on software, International Business Machines Corporation, more commonly known as IBM, is an information technology (IT) company. "Its portfolio of capabilities ranges from services that include business transformation consulting to software,…