American History 1988
Chapter 269 - 260: Microsoft’s Threatening Momentum

Chapter 269: Chapter 260: Microsoft’s Threatening Momentum

As is well known, America’s stock market issues cash dividends!

Profitable businesses tend to pay dividends to investors after each fiscal quarter’s financial settlement.

This is a common practice in the US stock market, and Wall Street analysts also use quarterly dividends as a basis for evaluating a stock’s value.

Why are Americans so keen on trading stocks, without the habit of saving money?

It’s because their wealth is in the stock market—stocks not only offer the potential for capital gains but also provide cold hard cash through dividends!

Those companies that have been listed for ten years and constantly report profits but never pay dividends are outright hooligans!

Ahem—, as a star company in Silicon Valley, Byte Company, of course, follows the tradition of paying quarterly dividends.

For a business, paying dividends can attract more investors and also enhance shareholder returns.

Moreover, investors will have more confidence in the company, and all these positive effects will ultimately reflect in the company’s market value.

The reason Byte Company’s dividend payment was delayed until February is that it’s a newly-listed enterprise.

There are many management processes to handle, and financial settlement takes time, which is why it has been postponed until today.

Indeed, Byte Company could choose not to distribute dividends—it is not a mandatory measure.

However, considering that the major shareholders have held their shares for nearly half a year, the board decided it was time to reward themselves!

That’s right, the major shareholders are on the board; the dividends are essentially being paid to themselves.

The most important thing is that Byte Company’s profit for the last quarter was astonishing; rather than continually driving up the stock price, they thought it better to pocket some of the profits first.

According to the financial statements, Byte Company’s sales in the last quarter of last year were 230 million US Dollars!

The annual sales total for ’91 exceeded half a billion US Dollars, reaching a new height of 540 million.

Actually, in the two and a half quarters before going public, they had already distributed dividends once.

At that time, their sales were close to 300 million US Dollars, with profits around 50 million.

Dean received a dividend of 20 million US Dollars at that time; otherwise, where would he get the cash to establish the investment fund within the CIX Alliance?

The funds Dean had put into the stock market before had not been cashed out.

After all, the stock prices of companies like Cisco, Microsoft, and Intel would maintain an upward trend for quite a long time.

Knowing he would make money, Dean, of course, saw no reason to cash out.

This time, after going public, the dividends mainly came from the successful sales of Work title.

Compared to the investment phase of the Teams software, Byte Company had much more mature cost control when launching Work title.

Their distribution channels were already established, and the European market had stabilized, resulting in higher profit margins for the last quarter than before.

The sales of 230 million US Dollars ultimately generated a post-tax profit of about 50 million, similar to before.

This profit margin even exceeded 20%; seeing so much money lying in the account, the board members couldn’t contain themselves.

Therefore, they kept suggesting to Dean that he distribute part of the profits as dividends, which would be favorable for Wall Street’s rating of Byte Company’s stock.

After considering it briefly, Dean agreed to the suggestion, as he didn’t plan to sell his shares in the short term.

If that’s the case, taking a bit of dividend now didn’t seem a bad idea.

Following the usual industry practice, the dividend payout ratio for listed companies is generally 50% to 70% of the profits.

Byte Company decided on the midpoint, distributing 60%, which is 30 million US Dollars of the profits for dividends.

Based on Dean’s shareholding ratio, he could get approximately 11 million US Dollars.

See, dividends are really tempting.

Sequoia Capital and KeyPoint Ventures would each receive several million US Dollars, and the rest will be paid out to the public market according to the number of shares held.

Of course, after the dividend distribution, Byte Company’s stock price will slightly decrease on the next trading day.

This is because the market needs to deduct the dividend payout, but this fluctuation is minimal.

As the business operations continue, this part of the profit will quickly be replenished in the accounts.

In addition, by paying taxes, there’s no need for a stock ex-dividend adjustment, so there’s no need to reset the stock price.

Byte Company’s sales last year reached 530 million US Dollars, a 344% increase over the previous year.

This is 44% higher than the triple-growth target set by Durell; with this kind of momentum, how could the stock price fall?

Even after one dividend distribution, Byte Company’s market value soon returned to the 5.6 billion US Dollar level of the beginning of the year.

The market is currently bullish on Byte Company because they have produced two successful software products in a row.

Oh, right, and their stake in Intuit, as well as the promoted Quicken financial software.

Ever since aligning with Byte Company, Quicken’s sales have been climbing steadily.

Many people hadn’t heard of Quicken before, until Byte Company’s distribution network brought it to their attention.

They then realized that in addition to various financial features, personal tax filing could also be done with the help of the software.

Just by entering your personal information and state, the software will automatically calculate the amount of tax refund or additional tax owed.

Even the process of filling out the tax forms and the tax filing procedure are provided with dedicated guidance in Quicken.

For Americans who struggle with math, Quicken has been a tremendous help.

Just two months into ’92, Intuit’s sales have already hit 15 million US Dollars, more than their total revenue for the last year.

Cook and his colleagues are ecstatic; they can hardly imagine what this number will be by the end of the year.

But it’s not without its troubles; here comes Cook, the CEO of Intuit, to Dean for advice again.

"Microsoft updated the version of Microsoft Money?" Dean looked surprised at what Cook held in his hand.

"Yes, they just went on sale today, and I bought a copy when I passed by the Arrow store."

That iconic letter logo with a blue background immediately made one think of Microsoft.

Dean didn’t dawdle; he took the CD-ROM from Cook’s hand and started the installation on the spot.

With the widespread use of CDs, the relatively expensive floppy disks were gradually being phased out of the market.

Here in Silicon Valley, most software companies, including Byte Company, had started using CDs to package their software.

With a capacity far exceeding floppy disks and a cost of just over a dozen US dollars, the popularity of CDs had exceeded expectations.

Most software nowadays was not large in size, and within a few minutes, Dean had finished the installation.

He clicked on the Microsoft Money icon and silently started counting, 1, 2, 3...

By the 18th second, the software interface popped up.

"It’s 10 seconds faster than before," Dean’s brow furrowed slightly.

"What?" Cook didn’t realize that Dean had just performed a comparison between the previous and current versions.

"This version of Microsoft Money loads 10 seconds faster than before."

Dean couldn’t help but marvel at Microsoft’s rapid progress; what surprised him more was that Microsoft had started version iteration in just two months.

It seemed that Byte Company’s collaboration with Intuit really irritated Gates.

He had begun to invest in Microsoft Money without regard to cost, vowing to compete with Intuit in the market.

Otherwise, with Microsoft’s normal pace, updating the software once a year was already considered fast.

And hearing Dean’s assessment of Microsoft Money, Cook also felt immense pressure.

A behemoth like Microsoft was indeed daunting when it got aggressive.

"What should we do, Dean?" It was just two months; what if it were half a year, or a year later?

"Don’t rush, let’s first try out this software," Dean said and began testing various functions of Microsoft Money.

After a round of experiences, both of them breathed a sigh of relief.

Microsoft Money hadn’t made much change in its functions compared to the last time, and even some obvious bugs had not been fixed.

It seemed that this version update from Microsoft mainly targeted software optimization issues.

After all, problems like lagging and crashing were severe flaws that greatly affected user experience.

Thinking about it, two short months was hardly enough time to undertake a major software upgrade.

So what was the purpose of Microsoft’s rushed software update?

It was clear that Microsoft Money, as it stood, still wouldn’t pose a threat to Quicken.

"They have lowered the price of Microsoft Money." Just then, Cook pointed to the software packaging box on the table.

Dean’s gaze shifted, and only then did he notice the figure of 39.5 US dollars printed on the blue box.

"What was the price of their first edition?"

"The same as ours, 60 dollars." Cook knew these numbers by heart.

"It looks like our Mr. Gates is really angry," Dean suddenly smiled.

This price cut from Microsoft was quite aggressive; while it backstabbed old customers, it also created a price advantage over Quicken.

"Do we need to lower our prices?" Cook was itching with hatred for Microsoft—these were, after all, Intuit’s profits.

"No, don’t enter a price war unless we absolutely have to," Dean dismissed Cook’s suggestion.

You shouldn’t wage a price war in the software industry; it only results in mutual harm.

Besides, against Microsoft, Intuit was likely to lose in the end.

"Then what do we do? If we ignore this, a certain portion of users will undoubtedly shift to Microsoft."

Leveraging its dominance in operating systems, Microsoft could attract a subset of users to Microsoft Money even if its performance was subpar.

Dean understood Cook’s anxiety, but lowering prices wasn’t the only option.

"Quicken is much higher in quality than Microsoft Money. Users know how to choose their products.

So the first step, we perfect the next version of Quicken and then release it as soon as possible.

As long as we maintain our update progress and make each one better than Microsoft’s, we will undoubtedly be the final winner.

The second step, if Microsoft continues to lower prices and draws a certain number of users, then Quicken can also reduce prices appropriately.

However, control the price reduction range and avoid falling into a price war with Microsoft.

The third step, to expedite the development of TurboTax. Focusing on enterprise tax software business can increase our risk resistance."

Dean and Cook analyzed the subsequent measures to take one by one. Software business competition was a long-term process, not quickly settled.

And having heard Dean’s lengthy analysis and detailed measures, Cook felt much more reassured.

Intuit had no experience competing with its peers, so he could only come to Dean for analysis.

The results did not disappoint Cook; he got the answers he wanted.

It was no surprise that a super founder with a net worth of 2 billion US dollars, Dean showed remarkable talent in management as well.

"Right, to prevent Microsoft from poaching our customers, let me teach you another trick."

Dean leaned into Cook’s ear and whispered a few sentences.

A minute later Cook’s eyes lit up, that’s damn cunning!

Is this the might of a 2 billion US dollar capitalist? Cook was blown away.