Written by Shariah Stocks Screening

Is MICROSOFT CORPORATION Stock Halal to Invest in? Facts you should know :: 2nd March 2021

TickerMSFT
Company NameMicrosoft Corporation
Shariah ComplianceCOMPLIANT
DP RATIO3.38 %

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 DescriptionRevenueNon-Permissible Revenue% Non-Permissible RevenueNon-Permissible Segment ClassificationComments
Server products and cloud services$ 41,379
Office products and cloud services$ 35,316
Windows$ 22,294
Gaming$ 11,575$ 2,03717.60%Possible Adult contentThere 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$ 7,740This 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$ 8,077
Enterprise Services$ 6,409This segment has software sales to financial services firms. But since software is a neutral product, this is not considered Shariah non-permissible as per the rules of Islamicly Shariah board.
Devices$ 6,457
Other$ 3,768
Total$ 143,015$ 2,0371.42%
Total Revenue$ 1,25,843.00
Non-permissible Operating revenue$ 2,003.94
% of non permissible revenue1.59%
Sector CompliancePass
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Non-operating Revenue in Millions of USD – Other Income

Segment DescriptionSegment RevenueNon-Permissible Revenue% Non-Permissible RevenueNon-Permissible Segment ClassificationComments
Interest and dividends income$ 2,680$ 2,680100%Interest Income
Interest expense-$ 2,591
Net recognized gains on investments$ 32$ 32100%Conventional investment income
Net gains (losses) on derivatives$ 187$ 187100%Conventional investment income
Net losses on foreign currency remeasurements-$ 191
Other, net-$ 40
Total$ 77$ 2,899

Dividend Purification Calculation

Revenue DescriptionNon permissible Revenue (millions of USD)
Non-permissible operating revenue$ 2,037
Non-permissible non-operating revenue$ 2,899
Total Non-permissible revenue$ 4,936
Total Revenue of the Company (Gross)$ 145,914
Dividend purification ratio3.38%

Financial Ratio Screen
(All figures in millions of USD for Period ended 31st December 2020)

ParticularsAmountRemarks
3 years Average Market$ 1,133,747
Total Debt$ 72,041
Islamic Debts
Adjusted Debts$ 72,041
LC1 Ratio6.35%Within limits
Cash$ 131,968
CC2 Ratio11.64%Within limits
Accounts Receivables$ 27,312
CC1 Ratio2.41%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 June 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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Last modified: September 11, 2024
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