Microsoft is primarily a developer of desktop business applications that also happens to own the underlying operating environment in the form of Windows. Although NT is a much improved version of Windows after 10 plus years of development, the application support services are geared toward stand-alone workstations with ad hoc configurations and virtually no remote management capability. On a more fundamental basis MSFT software is archaic and inextensible, as is their component architecture. MSFT is going 200 mph down a dead-end street in an early-model junk pile and the inevitable crash is not going to be a pretty sight. Watch IBM and Sun join Intel in a collaborative effort to modernize enterprise computing in 1988. Microsoft's inevitable decline was set in motion about two years ago and it's too late for them to do anything about it now.
Dear friends, I think that an increasing number of people perceive MSFT as having far too arrogant marketing practices. The source of the problem might be Bill Gates own egomania (very understandable egomania, by the way) and the simple fact that they are one of the most successful business stories of our time. It just seems that MSFT believe in their natural right to impose their product concepts only because of their Windows OS monopoly. This idea might seem crazy but that's the perception I have when I can't delete some of the icons of Windows95 for example. MSFT very clearly (sneakily should I say) has integrated software modules in Windows95 in a way that is not technically oriented but purely marketing oriented. It is a undeniable fact that MSFT is trying to use its Windows OS monopoly to enter new areas in the software market. Any agressive company would do exactly the same. That's why the justice department exists and has a say in antitrust matters. I believe that many new software companies are emerging with excellent and innovative products and they have to be protected against MSFT's natural tendency to integrate new concepts into Windows to defeat competition. Let me finish by saying that MSFT has not achieved an undefinite priviledged position through its windows OS. I think the windows concept is getting old and MSFT a slower and arrogant company. It wouldn't surprise me that new revolutionary OS concepts emerge in the years to come.
From an equity perspective, I don't see how Microsoft can maintain such a incredibly high PE. IMO the only factor that has helped to support the price is that the company still controls nearly 40% of the shares. Now, with such a ridiculous PR debacle, and with every state government looking at it's business practices, public sentiment is not in their favor. With fundimentals looking sour even with future growth and the abnormal psychology that affects market price... let's just say that I wouldn't find myself long here. Intel, though they dominate their market like they do, understands the value of reasonably good PR. When the glitch in their processor became public, Their first statement about it being relatively unimportant was soon reversed. I suspect that they replaced only a very small number of the processors when all was said and done. However, Microsoft is acting with unparalleled arrogance. I can only guess that it might be attitude ,but more likely fear. They certainly have an incomparable marketing ability. But marketing needs future products and support services to feed such an unbelievably large growth demand even at a 30% margin. Their purchase of WEB TV is certainly a good indication of where they expect a good portion of that future growth. The company is defending too many fronts and IMO I don't see how they can continue at this rapid pace under such adversity. BTW one more indication of weakness - Intel-Sunw agreement last week.
These are all wonderfully innovative companys and will be around for a long time. My comments are only related to the price of their respective equities. DWB