Microsoft is a difficult situation for me to evaluate. I think the company still has much growth ahead in some areas. But that depends on the management. The three main activities that are already well developed: Windows, Office and pit servers. The first two are wide spread and are used by mane large companies. Windows business model in operating systems is large. They keep improving every few years, the hardware can’t necessarily be replaced that fast, but I guess that’s what makes people but newer computers. I think that the new release (Win7) will be bigger than people expect (eventually) as it allows cross-selling other Microsoft products (but we shall see). I hope the press will not be very negative, at least until after the launch, there will always be some mistakes and delays. Finally games, video games will be a big business for Microsoft. I hate economics console business, but the love of the economics of publication (and development), part of the Microsoft things. Sorry, see they did not use their cash pile to buy an established business here (editors were cheapest on the market a few years ago, an all cash deal that worked well. Now everyone thinks video games the next big thing). The console wars are going well for Microsoft. The two keys to establish a dominant position of the console being launched first and get good games on their platform. Let’s see how Sony (SNE) will this round, but hopefully will be the big surprise here loser – Nintendo. I think the Xbox 360 and Nintendo’s new console (Wii) will do very well. It will be interesting to see the breakdown of the consoles in both domestic and foreign markets. I think Sony has abroad remains strong, but could be in a much poorer position at the end of this round than they were with the long-term PS2. I think Google’s position is much weaker than most people think. I do not think Microsoft will be the only beneficiary here. The search is a very natural cross-selling Windows. That is the direction that everything seems to be on the top (which combines online searching and desktop). For future growth in terms of market share I think Microsoft is in a better position than of Yahoo (YHOO) or Google (GOOG). I also believe we could see a couple of other (largely unknown) motors Search Action. I gain some strength that Google is your brand. His mastery helps advertisers with more users. I do not see a lock in users. Besides, I think Google has not been well positioned to do just about anything outside of searching keywords. I hope I see a lot more things in the way of intelligent social search inspired. Years from now, much of the search will help you find what you were not aware to find. Google is dominant in a different market: helping you find what you know you want to (but do not know the name and location). The two types of search are very different. Both are important, but the growth of other forms of search is coming from a smaller base and probably will be integrated with the search keywords. Google has more to lose here. Other devices Microsoft wants to perform well, are your mobile devices and your TV. Compared with competitors, is very strong in these aspects. The strategy seems to be that I would support – to control the point of initial contact, if used the software and then only venture into the actual implementation or side. The contents of the company is very profitable to do so. In video games it will be very profitable. In other areas it is less likely to be very profitable. I hope to see more generic, web-based applications. These will be less profitable for everyone. Office should hold up well, but not as well as Windows. Basically, Microsoft has to take what they have in the PC and import it to televisions, handhelds, consoles, and Web. This should be the strategy. I think it’s a good strategy. These are independent companies that must be broken to unlock creativity (as some have suggested). Rather, the profit potential for each is much higher by Microsoft. If you take these separate pieces that are worth very little. Not only would the three companies started talking and the console/games business. A international level, will be the natural growth of Microsoft’s dominant firms. There will be a huge growth rate, but will be strong and require virtually no additional investment, certainly. In general I like the future of a lot more software than hardware, because the marginal gains in the quality of hardware will slow considerably in the coming years. The question is what can be done mathematically in terms of increasing specifications, is what this means for the user. We are reaching a point where the individual user does not directly see the benefits of increased hardware performance as clearly as it did in past. Much of research in this area will only serve to reduce prices and benefit memory intensive companies – will not provide as much of a ‘wow’ factor for the user more research. This is especially true in games. The situation in desktop applications is such that improving the software design is where most of the gains come. The computing power is not simply a scarce resource for most individuals sitting at home or in a cubicle. The progress that some users will benefit greatly and drip to the end user (often via the Internet) through quick response and cheap services. But that’s just a change perceptible. See here something similar to the kind of thing you see in the brokerage business. It will not be obvious, because price competition is not so great in general software. And just look at the price to get something electronically. That is very different from what we have seen in recent decades, where progress had also attracted new users, because it allows developers to do something different, not only more cheap. This is a very long term trend that worries me. It could weigh heavily on a company like Dell (Dell) since PC are quite durable, once the rate of obsolescence is slowing, sales have to slow as the cycle lengthens. I think that Microsoft management is absolutely the best in the business. In fact, I think it is one of the best in any business. Would be difficult for me to find more than a handful of people who prefer to manage a business that he owned part of. I also believe that the current system is sufficient good. Or a line between current operations and future investments in the President / CEO of division that investors will probably get the most benefit from the brilliance of the President of this world underestimates way. All Bill Gates. It’s easy, because his great triumph came a long time ago. But he is interested in building something lasting. I trust him more than anyone in the technology without a question. He always impresses me if you are talking about their own industry or some other topic. He has exactly the right kind of mind of someone running a business in the long term is a concern. Qualitatively, I think Microsoft scores close to perfection. I could cite statistics on profitability, but I will not, because you know they are better than almost any business on the planet – and a large diversion of resources for future investments that are required to maintain the cash cow and Windows broad moat of franchise. Assessing the valuation is a bit more worrisome. Microsoft is not the point on a base / EBIT EV where the stock would be if we run the risk of not extraordinarily profitable growth in the future. In other words, the current price, obviously makes a link key is to be the earnings growth. I think you have to believe MSFT that they will have a real future in the search, gaming and non-PC devices, which fuel future growth highly profitable. I think that the future is there. For really large cap action (such as $ 10 million or more) is almost as attractive as anything else on the planet right now – and certainly more attractive is the action of any U.S. business very large. While Intel (INTC) and Dell are cheap looking, do not like them nearly as much. Dell is an interesting situation, but do not quite understand the business enough.
In conclusion, I do not own any shares of MSFT. I will not buy any. I do not normally own stocks from such large companies. I prefer much smaller businesses, because the mispricings tend to be more out of control. You will not see MSFT trade to an EBIT / EV, 7. 5 or something, but sometimes those opportunities on the quality of small (high) companies. Or a lot of possibilities to find wild mispricings without much of the future be a concern. These are situations that prefer to invest, because companies like MSFT awfully big of an anchor with the amount of capital they have – also tend to be less likely to be extremely price incorrect. But if I had to the company with a market capitalization of over $ 10 billion and keep it for life was going to buy Microsoft here without hesitation.
