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Motley Fool Writes Off Microsoft
The Vista disaster has caught Wall Street's attention before but I've never seen the popular press understand the issues like this argument in the Motley Fool. The opposing argument is a weak statement of faith, essentially "as it was in the beginning is now and forever shall be." "You don't need to watch the 'I'm a Mac, I'm a PC' commercials to see that Microsoft is taking a beating. You see it in the company's financials where its online unit, incredibly, is operating at a loss; overheating Xbox 360 consoles find the company taking a huge warranty hit for a system losing market share to the Wii; and the upgrade wave of its flagship operating system has been more of a ripple than a tsunami. That last point is important. This was supposed to be Microsoft's final feast, the major last hurrah for its Windows Vista operating entry and its Office 2007 suite of applications before the inevitable embrace of cheaper open source operating systems and Web-based apps... In fact, even Microsoft will tell you that its fortunes peaked several months ago."
MSFT shares are up 3% today after another strong rise yesterday, after announcing their financial results and outlook.
"Weak statement of faith", twitter? That's rich coming from someone whose faith in his own assertions is so weak that he chose to disable comments in his journal rather than make a real effort at refuting critics who post in it.
Here's hoping HD DVD's troubles means that they'll remove all the "secure path" BS from Windows 7. They only did it to placate Hollywood, and it's a major reason why Vista had developmental problems. (Note, they'd have had to do it too if they were supporting Blu-ray instead - the point though is that I'd like to see Microsoft throw a tantrum and remove a "feature" they should never have added in the first place.)
You are not alone. This is not normal. None of this is normal.
While I can see this as a mark of the beginning of the end for Microsoft I really wouldn't write them off just yet. They still have a metric butt-ton of market share, and are still overall profitable. Should they manage to stop the hemorrhaging of cash with the XBox (Which I can easily foresee) and come up with a good reply to Vista (Like they did with Windows ME/Then Windows 2000), then I can see them rebounding quick.
However, I also see the general public becoming more and more sophisticated when it comes to things like Operating Systems and understanding that there are indeed options out there. And with knowledge of options will come people exercising those options.
In other words there's a up and down roller coaster ride ahead but this ride may be coming to a full and complete stop.
But people failed to beat a path to the PS/2; they waited, and used things like EISA until PCI came along and was roughly as good as Micro Channel. IBM finally learned that they didn't own the PC market anymore.
IBM's still around but isn't a colossus astride the computing industry. Microsoft has now discovered that the competition is "good enough" and the Microsoft name isn't enough to force people to follow along with whatever they say. Like IBM, MS isn't going away... but they'll be one option among many in a few years, not the single dominant giant.
PHEM - party like it's 1997-2003!
I thought Vista was an interim OS between XP and Windows 7?
If you haven't made a developer cry, you've wasted a day.
But it's in the first article, not the second.
ZOMG, people are specifying XP instead of Vista! Sure, but they're still buying Microsoft. Apple is topping out its niche appeal, and corporations are run by lawyers who hate and fear Google Docs with a cold reptilian passion.
Wise up, nerds. Major purchasing decisions are not taken by people live with their parents in Wyoming. They are taken by grown ups who have mortgages and orthodentist bills to pay, and those people recommend, and will continue to recommend, Microsoft because nobody ever got sacked for doing so.
The upcoming recession may see a few smaller outfits switch to freeware in the hope of chiselling a few dollars off the budget, but that's probably a sign that they're doomed, and so wouldn't have been buying M$ one way or the other.
Still, I'm swimming against the tide of opinion here, if not of history, so feel free to get excited about the prospect of the Evil Empire toppling any day now. Let's compare notes in 5 years and we can spot where you went wrong.
If you were blocking sigs, you wouldn't have to read this.
Vista is not Micro Channel. Vista is Windows ME.
It's not about the money. Want to make more? Just run the printing presses faster. Money hasn't been reliable enough to be used as a measure of performance for nearly a decade now.
Really it's about influence, and that's what Microsoft are losing, have been for several years.
Deleted
Wow ... "Vista is the Windows ME of our generation" (emphasis mine)
I didn't know a generation had passed since I bought ME in college (for $5 through school).
KillaBeave == Old, Sad Panda
What you are missing is Microsoft started paying out annual dividends starting in........... 2004! Plus some fairly aggressive stock buyback.
Frankly, their cash reserves have dwindled because simply put, sitting on 60 billion worth of cash is just dumb.
Plus as long as Apple computers continue to be significantly more expensive than Windows based computers Microsoft is still gonna stay in business regardless of how lame Vista may be.
I mean you can buy a frigging $400 pc laptop. It'll run your word processor, internet and whatever other work like things non graphics types run. Whereas the starting price of Apple laptops is $1200
AND you can say what you want about Linux, but for the average smuck walking around a best buy with a wad of cash it's not even on their radar.
I have nothing compelling to say
You're literally right that software doesn't rot, but you're functionally wrong, I think. Mitigating against switching to free replacements is the fact that a strategy of continual, incremental upgrades is generally the best way to handle the overall environment.
Anyone who loves or hates any language, platform, or manufacturer, doesn't know what they're talking about.
What the Fool is pointing out that Microsoft is a risky investment where the returns are poor.
If you buy shares you want as low risk as possible and decent returns (10-15% is average, somewhere between a low risk and high risk investment).
Microsoft is risky simply because there's so much uncertainty over Xbox 360 warranty claims, poor Vista sales and yet another EU court case.
Nope.
As long as you have the ability to maintain your software, it will
never wear out. You can always train someone else to be the
maintenance monkey. Admittedly, this only works for software where
you have the source.
This does NOT necessarily imply "Free Software".
Saavy companies get the source to important applications so they
can maintain those systems if necessary. Software like that can
(and has) last longer than most of us here have been alive.
Also, the world (or technology) isn't as dynamic as a lot of people would like to think.
A Pirate and a Puritan look the same on a balance sheet.
The article cites future revenue growth of 10%-15% a year as evidence of MSFTs decline. Huh? Most companies would kill for that sort of growth.
Moderate the article -1 Troll please.
Now that's funny, because I recall reading just a few days ago that Microsoft is stating the highest ever profits (or is it revenues?) for its last quarter. And the MS games division announced it's profitable now as well after running for a loss for years.
Vista is a big stumble for MS, no doubt about it. But to say this is the beginning of the end? That's a stretch.
In the end they will lay their freedom at our feet and say to us, Make us your slaves, but feed us. - Fyodor Dostoyevsky
I would say that about Unix-based systems and software. Don't even dare to say that about Microsoft, Microsoft is more like the fake lego blocks that have been around. They look like they fit the standards but when you actually go to connect them, they don't align properly. Sure if you go and buy all kinds of fake lego blocks then they might work FOR YOU but as soon as you go play with another kid it doesn't fit right.
Unix-based systems (Linux, Unix, Mac OS X) are like Lego blocks and Lego Technics (I don't know if they're still around) but without the plans. You can do whatever you want with it, but somebody knowledgeable has to use it to actually build something that works. Any ol' kid can build SOMETHING with it.
Example: here at my job we have a mixed environment, 30 Mac's, 7 Linux and 3 Windows. Now out of the box, I can connect the Mac's and Linux machines to the directory and without issues they will start authenticating. For Windows, we are forced to use AD. So we set up Samba. Of course, the latest updates for Windows break some Samba functionality (nobody knew this off course) and all systems had to be rebound to the AD. Long story short, to evade this type of jokes (AD login would become randomly unresponsive on the Windows boxes but continue working on Mac/Linux) we installed pGina with the LDAP auth plugin, no more problems.
Custom electronics and digital signage for your business: www.evcircuits.com
I have never been a big Microsoft supporter, but their numbers don't lie. From CBCNews dated today : 1). Microsoft said it was helped by rising sales of Windows-based personal computers. The company said it has sold 100 million copies of its new Vista operating system since it was launched a year ago. 2). The company also reported better-than-expected sales of Xbox 360 game consoles and improved software sales to business. 3). After markets closed Thursday, the software giant said its profits rose 79 per cent to $4.71 billion US, or 50 cents a share, from $2.63 billion, or 26 cents a share in the same period last year. That beat the consensus estimate from analysts polled by Thomson Financial by four cents a share. Revenue at the company rose 31 per cent to $16.37 billion from $12.5 billion in the year-ago quarter. Analysts had expected $15.95 billion US in sales.
That was the eye-popping part to me as well. I really had no idea their cash reserves were being so heavily depleted.
Which kind of goes against the bullish argument that they have no debt and large cash reserves, doesn't it? If they've burned through $40 billion of reserves in 3 years, if they do the same over the next 3 years they be around $20 billion in debt. At that level of finance, is there any real difference between burning through $40 billion of reserves vs. taking on $40 billion in debt?
Momentarily, the need for the construction of new light will no longer exist.
My first instinct when an international company traded in Dollars announces record profits is to see how the exchange rates changed between the two quarters.
In this case MS got a large boost by the weaker Dollar. But in no way does it account for a 79% increase in profits from the last quarter.
So let's look at what can account for MS getting huge profits:
1. They've gotten leaner. There were no layoffs and salaries are a large chunk of their expenses, so that's not it.
2. They've cut expenses by not printing DVDs and manuals and instead having people DL their software. That could be a part of it.
3. The number of computers sold has increased. Don't have the numbers but possible due to weak dollar making computers cheaper.
4. They've increased prices. Probably. We know their retail price for Vista is way larger than the retail price for XP but they sell only a small fraction through retail, and I doubt the OEMs would budge so easily without giving DOJ a call. Not likely.
5. They stopped hemoraging money on XBOX and Live. Possible.
All this of course doesn't mean that their long-term outlook is favorable. Cheap hardware makes the TCO of machines lower but also puts the pressure on OS prices. Everybody's down on them and is thus more aware of the alternatives like Macs and Linux.
It's doubtful they can ever again be a growth company. The number of PCs being sold each year is slowing down and that was their main driving force.
Although if they are going down because of some disruptive innovation like cellphones replacing computers it's going to take a long, long time. They've basically achieved a cockroach status just like IBM. You can be sure that Linux or Mac won't kill them.
Dejan