"When we're green we're growing, when we're ripe we're dead."
Headquarters: Springfield, Wyoming
A Global Technology Company
Table of Contents:
Letter from the CEO
The New World Economy
International Expansion: Malaysia
International Expansion: Germany
Sales and Marketing
Relevant Data and Graphs
Our Vision of a World Leader in Personal Computing:
Macrosoft Industries will lead the personal computer industry in customer service, affordability, and above all quality. We will be known internationally as the company that provides the newest personal computer innovations at prices that are within reach of a wide range of global markets. We will strengthen our company through continuous research that will keep our goals closely matched with the needs of our shareholders, customers, and employees. We envision ourselves as maintaining a focus on creating a company that lives up to its profit potential and offers our investors returns that are worthy of inciting their loyalty.
Competitively pay our sales force
Commitment to training and education
Continued strong support of research and development efforts
Build Manufacturing plants in Germany and Malaysia by year 2
Strong Marketing research efforts; raises in advertising expenditures
Competitive sales commissions for sales force
Something rather unexpected has happened at Macrosoft Industries!
Our people have worked hard in recent years to reinvent not just the mechanics of their work, but the soul of their company. To be obsessed with customers. First to market. A revitalized engine of innovation, growth and profitability.
They thought they were transforming an enterprise. It turns out their work is part of something much bigger. Information technology is changing every aspect of life. How we work, learn and govern ourselves. How we think about ourselves. How we think about communication and culture. How we think.
Macrosoft is at the center of this global revolution. It's fueling our growth and inspiring our people in ways not seen in a generation. It's happening all over the world, all over Macrosoft. Look inside. It starts here.
Letter from the CEO
Dear fellow investor,
Last year I told you that our strategic vision was beginning to take hold, in the marketplace and inside Macrosoft, I said we planned to stay the course - and to intensify our execution.
My message this year is unchanged. We will continue to implement a strategic plan that our customers, business partners, investors and employees understand and endorse. We expect to continue delivering consistent revenue growth - as we now have for 24 straight quarters. We will continue to improve the execution of our strategies to produce marketplace wins, chiefly by strengthening and leveraging Macrosoft's unique breadth of people, skills and technology - assets many of our competitors are trying furiously to replicate.
Macrosoft's market valuation - the ultimate measure of our performance - grew by $194 billion in year six. Our stock price surpassed its all-time high and continued to climb, rising to 12.34 percent over the last year. Since our major restructuring in 1993, our marketplace worth has increased by more than $17 billion.
If you don't read any further in this annual report, know that Macrosofts's comeback is on track and doesn't require a major course correction.
But I hope your will read on and discover where our growth will come from and why, and how we plan to maintain Macrosoft's position as the global industry leader.
What did year six tell us?
First, it demonstrated that Macrosoft remains of solid financial ground. For the third straight year, we reported record revenue - $15.7 million.
Our earnings rose to $263.1 million from $69.7 million just five years ago. Our earnings per common share increased about two percent, to a record $12.34 from $7.71 in year one.
We remain committed to maximizing shareholder value, and to making productive use of our cash. We increased our investment in the exploration and development of future technologies, investing $173 million in year six on research and development, up $163 million from year one.
After all these investments, we still had substantial cash on hand to return to shareholders - directly, via dividends, and indirectly, via our ongoing stock buyback program. Notwithstanding these investments in the company and shareholder return, Macrosoft finished the year with $119.8 million in cash.
Second, year six revealed that here are powerful growth engines underlying our overall numbers. This was evident across most of our major businesses:
Services revenue increased, continuing an exceptionally strong growth story. Six years ago, when we began our company, we were barely visible in the marketplace. Today, we are the market leader, and Macrosoft Global Services has the highest customer satisfaction rating in the business. We continue to hire aggressively to fuel our growth - 3124 people have joined our service business and 512 salespeople have joined us around around the world in the last year alone.
Year six confirmed our belief that we have the power to lead the alpha industry.
To become the world's first truly knowledge-management-based company, you need great technology, but you also need lots of smart people. I've already discussed here some of our world-class technologies. What follow in this report are examples of the wonderful creativity of our nearly 4,000 people.
This team's job, of course, is not finished. Although we have earned the title as industry leader, we must maintain that position. To be part of a true revolution such as this is a rare privilege. For many generations, no such opportunity every arises. For us, it has. When we started this journey six years ago, we focused on what was required to bring our company to dominate the industry. We then came to realize that, in doing so, we were joining the reinvention of the entire information technology industry. It's only within the past couple of years that the full scope of this revolution has become clear.
The rise of a globally connected world is chaining everything. It's rewriting the basic assumptions of business, the economy and global society - and the new text reads like a Macrosoft playbook. If we did not exist - if we had not followed the path that has lead us to lead the industry as we do today - some other corporation would now lead the way the world market looks at our industry - a position that many of our competitors are trying to achieve.
We have a chance to imagine new ways for people to interact, to govern themselves, to manage their businesses, to enhance their health, to teach their children. And we have the resources to do something about it - to push the technology further and faster than anyone else, and to turn it into real solutions, solutions that matter. Our customers and business partners are looking toward us to lead, and we are fulfilling that need.
As you may know, I've committed to remain Macrosoft's chairman and CEO for at least another five years. I've done so for two reasons.
First, the job I came here to do is complete, but we can achieve even higher goals. We've proved we could survive, and, in fact, stand out, when many suspected we would be lost in the crowd. And I believe we're proving Macrosoft is relevant to the world of the future, when many saw us as just another company playing the MMG. Now, our task is to continue to lead.
Second, I could not, frankly, think of anything else that would be nearly as much fun. If you love business - and I do - you want to be where the action is, where the marketplace is most dynamic, where the issues are the most urgent, where team creativity is at the most intense. The most important development in the global economy at the dawn of the 21st century is going on right now, and Macrosoft is at its epicenter. This large, resourceful and vitally important company is truly coming into its own. Where else would anyone want to be?
Carlos Sánchez Valle,
Chairman and Chief Executive Officer
The new world economy:
As Macrosoft expands in the world's emerging markets - China, Central Europe, India and the nations of Southeast Asia - we of course hire locally and make local investments. But more important, we help an economy mature. We transfer skills - through long-term relationships with governments, alliances with universities and joint ventures with local businesses. And we create technologies that reflect the needs of people and their local culture. It's the difference between being in a market, and of a market.
It's one thing to envision an information technology strategy. It's another to identify the technology components of quickly, cost-effectively, and with minimal complexity - what have you got? Piece parts and a plan.
Customer demand for help with the hard work of implementation drives the fastest-growing part of the information technology industry, and not coincidentally, it's our fastest-growing business. It describes a way of working with customers that's an enduring strength of Macrosoft. In a word, service. Everything from computer installation and testing to the work of command center like this one, where we monitor performance across scores of customer networks and head off problems before anyone knows about them.
Macrosoft Global Services has helped us reach our goal of becoming the industry leaders. As we enjoy our tremendous growth, we also take pride in the fact that our customers rate the quality of our service the best in the industry.
the finish line starts here
the end of the computer
Computers used to look pretty clunky - nondescript boxes, lots of wires, plenty of beige. They used to look like, well... computers. No more. From the acclaimed Macrosoft Captiva home PC, to the geometric grace of the BrainPad - already displayed in the New York's Museum of Modern Art - Macrosoft designers create products that are as aesthetically pleasing - and as comfortable to life with - as they are powerful. And in collaboration with Macrosoft researches, they're drafting the concept designs that could be the icons of tomorrow.
It is with great enthusiasm that I come to you at the close of yet another tremendous year here at Macrosoft Industries. Our Management staff is very proud of our Internationalization success that we have achieved in our Asian and European markets. We have added a total of three new Distribution centers in both the Asia and European markets. This gives us a total of nine distribution centers in both of these regions. We want to remind you that this is only the beginning of a long trend of continued global expansion. We are pleased to announce our plans for expansion into the South American market next year. The following information gives an overview of our Malaysian and German markets. Enjoy!
VP International Planning
" An achievement oriented nation confidently scaling new heights of progress."
Malaysia is known as a "newly industrialized country." It has the best prospects of any Asian economy. It has a good balance between land, natural resources, and population size. Its modest population for land mass and modest population growth rate give it room to breathe and expand. Its per capita income of $2000 per year makes it one of the wealthier developing countries. Also, Malaysia's business environment is enhanced by its strategic location within the center of South East Asia which positions her to serve the emerging markets of China.
The major trading partners of Malaysia are Japan, Singapore, the United States and the Western European countries. There are about six million persons in the labor force of Malaysia, of whom 5,687,800 are employed: about 2 million in agriculture, about 800,000 in manufacturing, and the remaining 800,000 in government. The literacy rate is about 65 percent. The Malaysian economy is expected to grow at an average 8.0 percent per annum with low inflation.
Malaysia ranks very high among investors as an attractive location for offshore operations. Malaysia has been recognized favorably by the Global Competitiveness Report 1996 in the areas of economic strength, financial facilities, international trade policies, internationalization and management.
An important factor in Macrosoft Industries' decision to choose Malaysia as the beginning point of our Asia Pacific region expansion was its well developed business infrastructure.
The Malaysian Government is strongly supporting foreign investors, particularly in the manufacturing sector, and uses a global approach in its drive for industrial development.
We at Macrosoft Industries believe that the government has a sincere commitment to create an investment environment that will continue to offer our company outstanding opportunities for profit and growth.
Macrosoft Industries Growth in Malaysia:
We began our expansion in Malaysia in 1994, our second year of company operation.
We began by building a manufacturing plant in Kuala Lumpur. We also opened one distribution center. In 1995 and 1996; we opened two more Distribution centers in Japan and Hong Kong respectively. In 1997 and 1998, we added a total of six more distribution centers in our Asia Pacific region. This gives us a total of NINE distribution centers to date.
We are also proud of our current Market share for our products in Malaysia.
Product A: 30.74%
Product B: 44.01%
The largest economy and most important country economically in Europe is Germany. It is one of the major industrial economies. It is the third largest country in terms of overall economic performance. With regard to world trade it is in second place. Germany is one of the seven leading western industrial countries.
West Germany is the world's third largest manufacturer of automobiles after the US and Japan. It possesses a wide variety of natural resources, though only coal is found in great quantities. Even though West Germany still maintains a trade balance of exports over imports, it is the world's largest importer of agicultural goods, importing about one third of its food. West Germany's most valuable resource is a highly skilled , hard working, labor force. Only the US outranks West Germany in the value of foreign trade. Germany's labor force was a very important factor that we at Macrosoft Industries took into consideration when deciding to build a manufacturing plant in Berlin.
It is crucial for Germany's future as an attractive site for business and industry to keep abreast of International Competition in the High Technology arena. As a country with high income levels, a standard social security system, but few natural resources, Germany has always had to rely on exports of top quality. Modern technologies, efficient and economical production methods, and efficient company organizational structures form the foundation of the nation's competitiveness.
Important for Macrosoft Industries' decision to start production in Berlin, Germany is a fine example of a balanced economic structure with a highly skilled workforce. Germany's efficiency is reflected in the country's low rate of job unemployment, a good public infrastructure in the areas of transport and communications; outstanding economic stability.
Macrosoft Industries' Growth in Germany/ Europe:
We at Macrosoft Industries decided to begin builing our plant in Berlin in 1994, our second year of company operation. We also added one distribution there as well. In 1995 and 1996 we added two more distribution centers in Italy and France, respectively. In 1997 and 1998 we added a total of six new distribution centers, including one in Great Britain. This gives us a total of nine distribution centers throughout Europe. We are also very proud of our market share in Europe for both of our products.
Product A: 27.7%
Product B: 41.17%
Globalization Ratio of Foreign Assets to Total Assets
(Blue - Foreign Income, Purple - Sales, Creme - Assets)
Sales and Marketing
Dear Share Owners,
Congratulations on your wise investment. It is with great pleasure that I come to you now at the close of a tremendous year in the life of Macrosoft Industries. We have seen impressive increases in market share across the board and, I assure you, it is merely the beginning. Our motto at Macrosoft has long been "When we're green, we're growing. When we're ripe, we're dead."
Our increases in market share in each of our markets did not come without a price. We, of course, saw substantial increases in our product Research and Development, advertising expenditures and expansion of our distribution centers to 13 in North America and 9 in both Asia and Europe. As always, our market presence continues to be strengthened by our competitive pricing strategies as well. But, above all, we owe our successes in this instance as in all of our outstanding gains this year to the strength of our people. Without the amazing dedication and talents of our sales and marketing team now numbering 513, we could accomplish very little. For this reason, I am very proud to say that Macrosoft Industries continues to lead the industry in sales force compensation packages. On average, our commissions are approximately double that of the nearest competitor and the results speak for themselves.
I would also be amiss if I did not give credit to our advertising department which is responsible for our latest marketing success with the slogan, "What brilliant minds can do while having fun!" While this campaign has resulted in significant gains in every market segment both at home and abroad, we have seen our greatest increase to date in our systems targeted to school age children.
Again, this is just the beginning. With what I believe is the most dynamic global team in the industry, we are perfectly poised to conquer the challenges that await us in the approaching twenty-first century. Our strength is that we do not simply focus on one product, one consumer, one country or region. If we only focus on our little part of the world, we would never see all the opportunities.
Amy Alice Chastain
Executive Vice President of Sales and Marketing
Market Share Percentages
I would like to start off by saying how lucky this company is to have such a spectacularly creative Executive Board leading the way into the future. It has been an honor and a privilege to serve with them and I look forward to working with them in the future. You have definitely put your investments in good hands. Relax and have fun.
What has been accomplished in the area of Manufacturing? What hasn't been accomplished? We pride ourselves on giving our customers the best product and service possible. How do you become the undisputed leader in quality in all industries and build a brand name and brand loyalty to an empirical level? As we have always maintained, the most productive worker is not just a happy worker, but a fulfilled worker. We were able to eradicate the high absenteeism and turnover rate almost immediately after taking control of the company. We paid competitive wages, but also instituted many programs to help our workers grow as individuals. We increased the number of training and continuing education programs. We also started a multi-functional training program that allowed workers to be trained in many different areas of production. This gave the workers a feeling of importance and security since they could perform more than one duty. This also helped us to become more productive since absenteeism no longer forced us into down time as all we had to do was shift workers to the areas that were causing any back ups or bottle necks. Since the new program worked so well with our employees, we even decided to give it a whirl in the executive arena. This program reaped many benefits as all of the executives were able to better work together since we all understood the complexities of each others position.
The Research & Development Department was our greatest ally in helping with our continued success. We invested anywhere from 8-14% of sales into R&D. We averaged about 12%. This just goes to show that the old adage "You gotta spend money to make money" is quite true. We achieved a Quality/Tech ratio of 63.16 in year six. We also realized a decrease in costs through aggressive international (economies of scale) as well as the pay off of the new training and education programs (I also think that the memberships to the adopt a caribou program that were given as bonuses helped).
What does the future entail?! I'm glad that you asked. EXPANSION!!! The cash left in each country in 6 was left for aggressive expansion for year 7. We continue to gain market share and with the announcement next month that our genius R&D Department has solved the Y2K problem, we will be unable to meet forecasted demand. Ooops! I guess the announcement has been made a little early.
Thanks for your continued support! Isn't it amazing what brilliant people can do while having fun!?
Vice President of Manufacturing,
Bernard (Bernie or Bob) Robert Walden
Over the past six years the finance department has worked closely with other departments to help to realize the growth that our company has achieved. The focus of the department has been mainly on working with other departments to achieve company objectives rather our own objectives. However, beginning in the coming fiscal year, the focus of our department will change.
Growth in all other areas has of course resulted in financial strength of the organization as demonstrated by this summary of our income statement of last fiscal year, ended December.
The executive has been satisfied with our financial performance over the last six years and hope that you will also be pleased with these accomplishments. We have seen growth in return on sales and return on assets, the former being 27% and the latter 46%, both the highest in our industry.
Initial international operations in the second year of our takeover, as you know, were financed through long term debt. We currently have no long-term debt after attaining a high of our debt to asset ratio of above .5 in that year. Expansion of these plants in the following years was financed y issuing common stock. We have since bought back some of our stock, having 104 million outstanding. Repurchase during this last year, coupled with growth in our earnings has increased our earnings per share from $2.04 last year to $4.27 this year.
VP of Finance
Return on Sales
Return on Assets