Microsoft & its Competition

by Rob Landley

Austin, TX (Sep. 21, 1998) -- Due to time constraints, and because the editor was bumped off-line after completing edits on this piece, I won't be offering the performance of our C-K companies, stock by stock. Overall, the portfolio trailed the S&P 500 last week, but we're still a handful of percentage points ahead of the broad-market index this year.

Let's dig into some of the news on our companies.

Recently, I've noticed a rift developing between two of our Cash-Kings: Intel (Nasdaq: INTC) and Microsoft (Nasdaq: MSFT). Now I'll happily admit to being biased on this subject. My favorite comic strip is "User Friendly" [] which devotes almost half its time to Microsoft bashing. Even I take everything I say about Microsoft with a grain of salt, but that's why I'm so careful to provide links to all my sources. There are a number of links in my version of the weekly news report again today. I hope you enjoy them.

According to articles in The New York Times [U.S. Investigating Microsoft's Role in Intel Decisions] and InfoWorld [Government investigating Microsoft/Intel relationship], Microsoft has apparently applied strong-arm pressure even to Intel, getting the hardware giant to drop plans to invest in Internet, multimedia, and Java technologies that compete with Microsoft's products and plans. This alleged behavior dates all the way back to 1995.

Recently, Intel has made several moves to assert its independence from Mr. Softy, such as partnering with Microsoft's rival RealNetworks [Intel cuts streaming deal] to offer streaming video technology. Intel is also outright courting the Linux community, officially supporting Linux on its upcoming 64-bit Merced CPU line [Intel Plans To Offer Support For Linux On Merced] and asking the Linux community for help implementing its new "Universal Driver Interface" to allow OS-independent device drivers to be written for PC hardware.

Intel isn't the only large company tired of being pushed around by Microsoft. Dell (Nasdaq: DELL) recently revealed that it's been quietly shipping servers configured with Linux to large customers who ask for it [Dell ships PCs, servers with Linux]. And earlier this month, old Softy Foe, Oracle (Nasdaq: ORCL), deepened its commitment to Linux by announcing marketing, distribution, and research alliances with four of the leading Linux vendors [Oracle Thumbs Nose at Microsoft With Expanded Linux Commitment].

It's interesting to note that last week Microsoft passed General Electric (NYSE: GE) and now has the single highest market capitalization in the entire market. While this is good news for shareholders, it also turns Microsoft's defense against the Department of Justice into something like, "Hey, we're not a monopoly. We're just the largest company in the US with over 90% market share in our extremely-profitable business. Gee whiz. Lay off." The Federal Government isn't likely to follow orders.

New activity on the legal front includes allegations that Microsoft may have destroyed documents rather than hand them over [Microsoft target of new probe]. And Microsoft also spent three days last week in court with Sun Microsystems (Nasdaq: SUNW), arguing about Sun's request for a preliminary injunction [Sun presents Java evidence against Microsoft].

As for the rest of the market, well, it's been a crazy week. The news from our companies had literally no effect on their stock prices, as everything was drowned out by instability in Russia and a man named Kenneth Starr, who, as far as we know, is not investigating any of the companies in our portfolio.

Still, this doesn't mean there wasn't any news. Pfizer (NYSE: PFE) had a good week, with Viagra being approved for use in 15 European nations [Viagra wins EU approval]. That will still mean something a year from now. So will the recently quarterly business report from Gap Inc. (NYSE: GPS), which also contained excellent news for shareholders [Gap Quarterly Report].

Schering-Plough (NYSE: SGP) received approval to sell two of its AIDS drugs bundled together under the name "Rebetron," but that good news was outweighed by a grassroots revolt against the fact that the price of their Hepatitis C treatment "Rebavirin" has more than quadrupled since Schering gained exclusive distribution rights to it in 1995. Cash-King or not, Schering-Plough must balance pricing with public sentiment like all companies.

Oh, and, last bit of news... Cisco split 3-for-2 -- whooptee.

Tomorrow, I'll be back here to discuss a different sort of Cash-King business -- the stalwart that concentrates on distributional power with low margins. I'll be reviewing companies like Wal-Mart, Dell, and Home Depot. Tune back in, same Fool Channel.

Rob Landley (Oak)

Cash-King Strategy Folder
Cash-King Companies Folder

09/21/98 Close

Stock  Change    Bid 
 AXP   +  9/16  85.06 
 CHV   -1 1/8   82.25 
 CSCO  +1 3/16  62.25 
 KO    -2 1/4   59.13 
 GPS   -1 1/2   59.00 
 EK    +  3/8   85.38 
 XON   +  1/16  68.19 
 GM    -  1/8   56.94 
 INTC  +1 5/8   84.63 
 MSFT  +2 1/2   107.88 
 PFE   +  13/16 97.81 
 SGP   -  11/16 97.13 
 TROW  -2 1/32  26.63 
              Day      Month       Year       History 
 C-K         (0.39%)    7.15%      5.60%       5.60%  
 S&P 500      0.37%     6.93%      1.78%       1.78%  
 Nasdaq       1.00%    12.09%      0.85%       0.85% 
 Cash-King Stocks 
     Rec'd    #  Security     In At       Now    Change 
     2/3/98   24 Microsoft     78.27    107.88    37.83% 
     2/3/98   22 Pfizer        82.30     97.81    18.85% 
     5/1/98   37 Gap Inc.      51.09     59.00    15.48% 
    6/23/98 34.5 Cisco Syst    57.56     62.25     8.14% 
    8/21/98   22 Schering P    95.99     97.13     1.19% 
    2/13/98   22 Intel         84.67     84.63    -0.06% 
    2/27/98   27 Coca-Cola     69.11     59.13   -14.44% 
    5/26/98   18 AmExpress    104.07     85.06   -18.26% 
     2/6/98   56 T. Rowe Pr    33.67     26.63   -20.93% 
 Foolish Four Stocks 
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko    63.15     85.38    35.20% 
    3/12/98   20 Exxon         64.34     68.19     5.99% 
    3/12/98   15 Chevron       83.34     82.25    -1.31% 
    3/12/98   17 General Mo    72.41     56.94   -21.36% 
 Cash-King Stocks 
     Rec'd    #  Security     In At     Value    Change 
     2/3/98   24 Microsoft   1878.45   2589.00   $710.55 
     2/3/98   22 Pfizer      1810.58   2151.88   $341.30 
     5/1/98   37 Gap Inc.    1890.33   2183.00   $292.67 
    6/23/98 34.5 Cisco Syst  1985.95   2147.63   $161.68 
    8/21/98   22 Schering P   2111.7   2136.75    $25.05 
    2/13/98   22 Intel       1862.83   1861.75    -$1.08 
    2/27/98   27 Coca-Cola   1865.89   1596.38  -$269.52 
    5/26/98   18 AmExpress   1873.20   1531.13  -$342.08 
     2/6/98   56 T. Rowe Pr  1885.70   1491.00  -$394.70 
 Foolish Four Stocks 
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko  1262.95   1707.50   $444.55 
    3/12/98   20 Exxon       1286.70   1363.75    $77.05 
    3/12/98   15 Chevron     1250.14   1233.75   -$16.39 
    3/12/98   17 General Mo  1230.89    967.94  -$262.95 
                               CASH     $48.07 
                              TOTAL  $23009.51 
 *Please note: On 8/4/98 $2,000 cash was added to the
portfolio for future investment. This will be reflected
in the numbers as soon as possible.

*The year for the S&P and Nasdaq will be as of 02/03/98