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Microsoft
Microsoft Positives

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By rupeh
June 25, 2001

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milleniumfalcon, here are a few positive factors on Microsoft you might want to consider.

This was originally posted a few months ago when MSFT was trading below $50 and I considered it a strong buy (just my opinion). While MSFT has moved quite a bit higher recently, the points below are still relevant. The stock might not be as strong a buy as it was, but the MSFT positives below should be taken into account when considering buying, selling or shorting MSFT. Good luck out there, especially if you are short MSFT. <g> Dave

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A few of the MSFT positives, FWIW:

1. a) The DOJ case looks weak and should be resolved in MSFT's favor. Our government can't afford to hurt the leading technology company at a time of economic weakness. Breaking up MSFT is not an option at this point. Their dominance in the PC world is expanding to other areas and the government won't do much to slow them down, much to the dismay of their competitors.

1. b) We won't see Judge Jackson again. The appeals court will remove him if he doesn't remand himself. He's already remanded himself from the bogus discrimination suit.

2. The PC clearly is not going away. The PC becomes a more and more integral part of our lives every day. MSFT owns the PC applications and OS world and will continue to do so for decades to come.

3. MSFT is clearly moving into additional areas to improve its growth, such as the server software market. According to IDC they hold a 41% (and growing) share of this market. They're not just a PC company anymore. They hold a growing and significant share of the server software OS and applications market.

4. MSFT has greatly improved MSN. They have more than 4 million users paying $21.95 per month. This is the model that made AOL so successful. MSN is catching up with AOL in the U.S. and has a lead over AOL outside of the U.S.

5. MSN web sites are the most viewed sites in the world. AOL has a slight lead in the U.S., but MSN tops the "unique viewers" per month worldwide. Eventually they will move to a pay-for-use model and MSN will become a major contributor to MSFT's top and bottom line. YHOO has less page views than the MSN sites, but they brought in more than $1 billion in sales last year alone. MSFT will make money from advertising, user fees and MSN subscriptions.

6. PALM no longer owns a dominant position in the Pocket PC world. Overseas, MSFT has dramatically cut into Palm's lead and is catching them in the U.S. as well. This trend will continue because corporate use of the Pocket PC will end up in MSFT's lap due to the ties with their Office software such as Outlook. This is a software platform of the future and MSFT is right in the middle of it.

7. Xbox should be a major success. Billions in revenue will flow to MSFT's top line. Game developers are climbing all over themselves to make games for Xbox. They pay MSFT license fees and this will provide MSFT with profits down the road.

8. .Net. Someone needs to pull the Internet and all of these devices such as phones, pocket PCs, PCs, pagers, etc. together and integrate them so they are smoothly interactive and update automatically once a change is made to any one of them. .Net will do this and only MSFT has the developer capacity and the market leverage to pull this off. This is the operating system of the future. The PC OS will still exist, but MSFT will be able to add tremendous growth if .Net is successful. The eBay deal the other day adds a lot of confidence to the .Net movement. Further agreements with major companies like Intel are proving that .Net has tremendous potential.
 
9. MSFT is moving into Front Office (CRM) software and services with its acquisition of Great Plains. This is a rapidly growing market and MSFT will take a share of it.

10. Linux and the 'open source' software movement are fading. They will still be around, but their threat to MSFT has been greatly diminished due to the economic slowdown. Companies must now focus on profits and giving away Linux software for free is not a good business model. Linux based companies are laying off a majority of their staffs on a daily basis.

11. MSFT is making good progress in the wireless web area. Their wireless phone software and m-commerce software will be a nice addition to their business.

12. Microsoft Transaction Services are an important part of the e-commerce and m-commerce world. While the rest of the companies in the Internet area get squeezed out of existence, MSFT remains strongly profitable and can pull in the business that these failing internet companies leave behind.

13. The dot-com blow-up will make the strong stronger and the weak weaker. MSFT has a lead in many areas, but it can capture additional markets due to the failure of these companies. It can also acquire companies with good business models but suffering market caps. The next couple of years will provide a number of great acquisitions for MSFT at great prices.

14. The dot-com blowup is providing MSFT with new employees. Before the blowup, it was hard to hire quality people. Now, there are numerous people looking for jobs and they're looking for them at companies that have stable and successful futures (i.e., MSFT).

15. Windows XP and Office XP will give a boost to MSFT's near-term sales and earnings. These are good products and they have a large user base to sell to. Over the next few years you'll see a majority of these users upgrade and it will provide a strong backbone for MSFT earnings.

16. Windows 2000 is gaining momentum. This gets MSFT's foot in the door at the enterprise level. This is an area that MSFT has not been strong in the past, so it is a source of great growth. Windows 2000 is very stable unlike the Win 95 and 98 versions. Companies are upgrading to Win 2000 for this stability and the numerous features that make it suitable for business use.

17. SQL server just won an award for best product in its category. The award said that no other product even came close. So sorry ORCL.

18. As the worlds workforce drops in numbers (demographic change), companies will have to focus on ways to get more work done with less people. They will spend more on technology and MSFT's software. This is a long-term trend that won't change and it will benefit MSFT.

19. The once-rumored boycott of MSFT products by China turned out to be false. Windows is installed on more than 90% of the PCs in China.

20. Extreme TV and Web TV are technologies just starting to become popular. MSFT has started advertising their products. Look for these ads on your TV and decide for yourself how well this product will do in the future. I suspect it will do well. Integrating the Internet and TV is a natural step to take and MSFT will be right there to capitalize on it.

21. Piracy is being clamped down on. This puts money directly in MSFT pockets.

22. MSFT is partnering with numerous companies (i.e., Datek announced today and eBay recently). These partnerships are in the thousands and will pay off in spades down the road.

23. Digital cameras and digital music both enhance the PC and both require software that MSFT can provide. Look for MSFT software that powers digital music players and integrates your player with the PC. Look for digital picture frames and photo editing software from MSFT.

24. MSFT is a major provider of middleware. They provide tools for software developers that assist with programming and with intranet development and management.

25. MSFT just launched its first true security software service package. This is a new entry for MSFT and has been accepted as a great product.

26. MSFT has a huge stash of cash and short-term investments (around $30 billion plus another $20 billion in long-term investments). Investing this cash at a safe 5% or 6% gives MSFT an earnings contribution of about $3 billion per year. That's invested safely in bonds or money markets. MSFT has a history of investing much better than this by getting positions in small companies and then making sure they survive and do well. They are positioned to do this for the life of the company and will see a steady stream of profits from it. $3 billion in interest every year? Try to find another company that has this level of cash.

27. Voice recognition software will be a major advancement in the coming years. MSFT is in the lead in developing this technology.

28. Office XP and Windows XP look like truly innovative products and are receiving great reviews from the various tech publications (especially Windows XP).

29. MSFT is in the middle of the 'smart card' technology movement. This will be common and a revenue generator for MSFT down the road.

30. MSFT and PFE are entering the medical software market. More growth potential.

31. MSFT and Compaq are making great strides with the Tablet PC. More growth potential.
 
32. Microsoft Producer looks like a good new product in a growing market.

This is not just a PC software company anymore.

All of the above is just my opinion.

Dave