This article discusses how Microsoft smoothed earnings in the past decade.

...That involves something that looks a lot like earnings management--although not of the sort that provokes penalties from the Securities and Exchange Commission or nasty newspaper articles about inflated profits. Starting around the unveiling of Windows 95 in August 1995, Microsoft has followed a uniquely conservative method of accounting for the software it ships--deferring recognition of large chunks of revenue from a product until long after the product is sold. The reasoning is that when somebody buys software in 1996, they're also buying the right to upgrades and customer support in 1997 and 1998. If it hadn't been for the new accounting technique, the company would have had to report a sharp rise in profits in the latter half of 1995, then a sharp drop in the first half of 1996--a turn of events that might have sent its stock price reeling--instead of the smoothly rising earnings that it did post. By the end of 1996, Microsoft had taken in $1.1 billion in unearned revenue that it had yet to recognize on its income statements. 'Because of this, they know what they've got in the bag from one quarter to the next,' says Marshall Senk, a Robertson Stephens analyst who follows the company. Which leads him to conclude that Microsoft does a better job of leveraging accounting--I would almost say it's a competitive weapon--than anybody else in the industry.

-KC Ho