Microsoft NZ revenues appear to have been bolstered by its $78m related-party purchase of Open Cloud NZ.
Open Cloud NZ was previously owned by another Microsoft Corp subsidiary, UK-based Metaswitch Networks, a maker of software that telcos can use to deliver voice and data services to their customers. Metaswitch was bought by Microsoft Corp in July 2020. Its local customers include Spark and 2degrees.
Microsoft has been asked for comment on its filing.
The firm saw a boom in its Teams product, online gaming and other cloud products during lockdowns, although its latest global quarterly result saw a slowdown in earnings growth - prompting the firm to lay off staff in October on concerns about future demand. The company did not put a figure on the reduction, which followed a July cull the company said would affect less than 1 per cent of its global workforce of around 200,000.
Asked if Microsoft New Zealand was reducing staff, and if so in what areas, a spokesman responded: “Like all companies, we regularly evaluate our business priorities and make organisational adjustments accordingly. This can result in workforce reductions. We continue to invest in our business and hire in key growth areas.”
In 2020, Prime Minister Jacinda Ardern announced plans by Microsoft to build three giant “hyperscale” data centres in Auckland. The first, in the city’s northwest, is now in advanced stages of construction.
The firm has not put a price tag on the build, but data centre maker CDC, half-owned by Infratil, has previously said the two hyperscale data centres it built in the northwest cost more than $300m, while Amazon says it’s spending billions on a data centre expansion into Auckland.
Microsoft says the local data centres will boost performance of cloud software, and smooth data sovereignty issues for customers like big banks and Government agencies.
Microsoft New Zealand has been owned by a series of subsidiaries in low-tax countries. In 2017, ownership of Microsoft NZ was transferred from Microsoft Luxembourg to MHB, a Microsoft subsidiary registered in Bermuda. Last year, Microsoft Ireland Research took control of Microsoft NZ. New Zealand subscriber revenue for Microsoft-owned LinkedIn is invoiced to Singapore.
In 2020, Microsoft set up a new local subsidiary called Microsoft 6399 NZ, which is 100 per cent owned by Microsoft Ireland Operations. A filing said Microsoft NZ “has contributed $39.1m for the construction of the new Data Centre building on behalf of Microsoft 6399 NZ”.
In December 2019, Microsoft NZ said it had paid a $24.7m “tax adjustment,” related to pre-FY2019 business.
The previous year, Microsoft NZ said IRD had begun an international transfer pricing audit relating to its financial years from June 2013 through to June 2017. IRD and Microsoft refused detailed comment. A Microsoft spokesperson said, “Microsoft is fully compliant with all local laws and regulations in every country in which we operate.”
