Shariah Stock Status report of Microsoft Corporation on 16th July 2020
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Shariah Stock Status Report :: MICROSOFT CORPORATION :: USA :: NASDAQ :: 16th July 2020

TICKER

MSFT

Company Name

Microsoft Corporation

Shariah Compliance

COMPLIANT

DP RATIO

4.30 %

Business sector screening:

Microsoft Corporation Is an American Multinational computing conglomerate at the forefront of the global IT infrastructure market. The company derives revenues from the following areas:
Software: Consisting of Windows Apps, OneDrive, outlook, Skype etc.
PCs and Devices: Consisting of PCs and Tablets, Xbox
Entertainment: Consisting of gaming products
Business products: Consisting of Azure, Microsoft 365, Data Platform, Advertising and Licensing of softwares
Developer & IT: Consisting of .NET, Visual studio, Windows server, Windows Server
Others: Free products and educational content

The tricky areas from a Shariah perspective are:
Gaming: If they are producing gaming content classified for Mature or Adult audiences having themes such as Sex, nudity, Gory content, strong language etc.
Advertising: The kind of advertising services provided i.e. textual, pictorial, marketplace model with controls or generic advertising properties.

Since the revenue from non-permissible operating income of the company is less than 5%, MICROSOFT CORPORATION PASSES the BUSINESS SECTOR Screening

Segment break up

Operating Revenue in Millions of USD for Year. ended 30th June 2019

Segment Description

Segment Revenue

Non-permissible Revenue

% non-permissible revenue

Non - permissible segment classification

Comments

Server products and cloud services

$ 32,622

Office products and cloud services

$ 31,769

Windows

$ 20,395

Gaming

$ 11,386

$ 2,004

17.60%

Possible Adult content

There is no detailed revenue break up of revenue from gaming classified by its Maturity ratings. An email to Microsoft Investor relations received a response (on 23rd April 2020) stating they will not be able to disclose anything accept what is already disclosed in the Annual report (10K). Hence an alternate mechanism was used to ascertain non-permissible revenue from this segment. The Company has 1702 games listed on its website. Out of those 300 have been given an IARC rating of 17+. That would mean 17.60% of games are classified as 17+. Hence, we have considered 17.60% of revenue to be non-permissible.

Search advertising

$ 7,628

This segment consists of MSN advertising including both native and display ads. Since this is operated on the principle of an automated ad exchange with content regulation, it is deemed a permissible revenue stream.

LinkedIn

$ 6,754

Enterprise Services

$ 6,124

Devices

$ 6,095

Other

$ 3,070

TOTAL

$ 1,25,843

$ 2,004

1.59%

Total Revenue

$ 1,25,843.00

Non-permissible Operating revenue

$ 2,003.94

% of non permissible revenue

1.59%

Sector Compliance

PASS

Non-operating Revenue in Millions of USD - Other Income

Segment Description

Segment Revenue

Non-permissible Revenue

% non-permissible revenue

Non - permissible segment classification

Comments

Interest and dividends income

$ 2,762

$ 2,762

100%

Interest Income


Interest expense

-$ 2,686

Net recognized gains on investments

$ 648

$ 648

100%

Conventional investment income

Net gains (losses) on derivatives

$ 144

$ 144

100%

Conventional investment income

Net losses on foreign currency remeasurements

-$ 82

Other, net

-$ 57

TOTAL

$ 729

$ 3,554

Dividend Purification calculation

Revenue Description

Non permissible Revenue (millions of USD)

Non-permissible operating revenue

$ 2,004

Non-permissible non-operating revenue

$ 3,554

Total Non-permissible revenue

$ 5,558

Total Revenue of the Company (Gross)

$ 1,29,397

Dividend purification ratio

4.30%

Financial Ratio Screen:

(All figures in millions of USD for Quarter ended 31st March 2020)

Particulars

Amount

Remarks

3 years Average Market

$ 9,08,528

Total Debt

$ 75,220

Islamic Debts

Adjusted Debts

$ 75,220

Debt Ratio

8.28%

- Within limits

Cash

$ 1,37,610


Cash Ratio

15.15%

- Within limits

Accounts Receivables

$ 22,699


Receivables Ratio

2.50%

- Within limits

Since all the Ratios are within the limit, the stock passes the Financial ratios screen

Source:
All the above information is based on the website of the company and Annual financial report for 2019 and the latest Quarterly report of 31st March 2020
Conclusion:
Given the above information, we believe MICROSOFT CORPORATION is a Shariah Compliant company as per the Shariah screening Criteria.

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