> Income tax expense: $4.57 billion
> Earnings before taxes: $20.03 billion
> Revenue: $72.93 billion
> 1-yr. share price change: -12.04%
> Industry: Software
In an industry in which success is often measured against fast-growing Google Inc. (NASDAQ: GOOG) and Apple Inc. (NASDAQ: AAPL), Microsoft has been maligned for its lack of innovation and the resulting poor growth. What is ignored in that analysis is that Microsoft is a money machine and has huge operating margins in two of its oldest divisions. Microsoft had a net income of $6.38 billion in its fiscal second quarter on revenue of $21.5 billion. The Windows division alone had an operating income of $3.3 billion on revenue of $5.9 billion, a 56% margin. The business division had an operating income of $3.6 billion on $5.7 billion in revenue, a 63% margin. Other divisions, however, dragged down results. Microsoft’s online operations, including its Bing search engine and its entertainment division, which markets Xbox products, posted operating losses. Largely due to the success of the two older operations, Microsoft has paid more than $5 billion in taxes in four of the past five years.
> Income tax expense: $5.30 billion
> Earnings before taxes: $21.90 billion
> Revenue: $104.51 billion
> 1-yr. share price change: 7.57%
> Industry: IT consulting
International Business Machines Corp. (NYSE: IBM), by most measures, is the second largest technology company in the United States, just behind Hewlett-Packard Co. (NYSE: HPQ). However, there are significant differences between the two. Most notably, HP is falling apart, while IBM’s continued financial success, most recently under its first female CEO, Ginni Rometty, has landed it on this list. One of the most critical reasons for IBM’s success is that it operates in a broad array of businesses, which means it does not have to rely on a single sector of the tech world. While IBM’s hardware operations are best known for its long line of mainframes, its software operations and IT services division are just as large. IBM is also geographically diversified, and very large parts of its annual sales come from Europe and Asia.
8. Berkshire Hathaway
> Income tax expense: $6.92 billion
> Earnings before taxes: $22.24 billion
> Revenue: $162.46 billion
> 1-yr. share price change: 31.01%
> Industry: Asset management
The house that Warren Buffett built continues to grow. Buffett bought huge railroad company Burlington Northern Santa Fe in 2009 for $34 billion. More recently, he agreed to buy Heinz with investment company 3G Capital. The sticker price on the transaction is $23 billion. Berkshire Hathaway Inc. (NYSE: BRK-A) continues to remain something of a mutual fund as the company owns large positions in American Express Co. (NYSE: AXP), Coca-Cola Co. (NYSE: KO), ConocoPhillips (NYSE: COP) and General Electric Co. (NYSE: GE). Berkshire’s recent earnings were also bolstered by its derivatives trading operations.The company booked a $1.4 billion gain from this activity in the fourth quarter.
7. J.P. Morgan
> Income tax expense: $7.63 billion
> Earnings before taxes: $28.92 billion
> Revenue: $91.66 billion
> 1-yr. share price change: 24.30%
> Industry: Financial services
Almost all the recent news about J.P. Morgan Chase & Co. (NYSE: JPM) has been negative. What was once considered the best-run bank in the United States has gone through a series of missteps, the most visible of which was a $6 billion trading loss in its London offices. As a result of the catastrophe, the bank agreed with the U.S. Comptroller of the Currency that it would improve oversight of its trading operations. The loss also cost several senior J.P. Morgan executives their jobs and tarnished the reputation of the bank’s highly visible CEO, Jamie Dimon. And, within the last few days, a Senate panel has accused the bank of a cover-up. Despite those issues, J.P. Morgan’s earnings have been solid and rose 53% in the fourth quarter, largely due to strong results in its mortgage operations.
> Income tax expense: $7.94 billion
> Earnings before taxes: $15.42 billion
> Revenue: $60.35 billion
> 1-yr. share price change: -22.86%
> Industry: Energy exploration and production
ConocoPhillips joins its larger rivals Exxon and Chevron Corp. (NYSE: CVX) on the top tax payer list. By sales, ConocoPhillips was the fourth largest public corporation in the U.S. until it recently broke itself into two pieces. One of the new companies, Phillips 66 (NYSE: PSX), holds the former parent’s downstream assets — those that handle refining and marketing. The rest of ConocoPhillips, which kept the parent’s name, is the largest of all the U.S.-headquartered exploration and production companies. Among the company’s initiatives are plans to drill above the Arctic Circle beginning in 2014. The move is risky. Competitor Royal Dutch Shell PLC (NYSE: RDS-A) recently stopped its operations in the same area due to engineering problems. ConocoPhillips also has significant assets in the Far East and runs the deepwater drilling operations in China’s largest offshore oil field.