For nearly every piece of software that Microsoft
The answer is simple. The company excels where few others play -- in providing end-to-end functionality and value. In business, what matters is the total cost of delivering a product or service, not just the sticker price. When you buy a Microsoft product, you get software that is typically:
- straightforward and easy to use
- supported by a very large player in the industry
- automatically patched when a bug or vulnerability gets repaired
- instantly interoperable with other Microsoft tools and the general public at large
- stable enough to support ordinary working conditions
All that, put together in a package that delivers the most critical features, is certainly worth something. Specifically, it's worth enough so that thousands of businesses make the decision to go with Microsoft's products over competitors offering lower sticker prices.
Toward a brighter tomorrow
In spite of Microsoft's strong financials and ubiquitous product suite, the past few years have been brutal on its stock. In recent years, almost nothing has gone right for this tech titan. Who would have imagined that digital music would have revived the fortunes of one-time operating system sparring partner Apple
Of course, it's precisely that appearance of weakness that attracted Motley Fool Inside Value lead analyst Philip Durell to Microsoft last October. Were the market always rational, companies would be valued solely on their potential future earnings, not their past results. When the market focuses exclusively on such backwards-looking problems (such as Microsoft's), it can easily ignore the future and undervalue the company. That gives you, along with other value investors, an opportunity to profit.
There are three primary reasons to believe that Microsoft's future looks brighter than its recent history. First, both the long-awaited Vista operating system and Office 12 will soon be released, starting another round of must-have purchases. Second, include new technologies like the 64-bit multicore processors now emerging from Intel
The Foolish bottom line
Although the headlines may be anticipating more trouble, Microsoft still dominates its industry. With internal and external product drivers pointing to a renewed upgrade cycle, the fear of stagnation that has haunted the business should soon be put at bay. Add its position as the first-to-market on the next-generation video game console, and you have a company poised to excel. The past's bad news is largely priced into the company, improving the likelihood that any future surprises will be positive. What's not to like about that picture?
Do you like the idea of buying companies whose shares have been beaten down so far that virtually any news will be good news? If so, Inside Value is for you. Click here to start your 30-day free trial and see just how we find and buy those firms. Subscribe today, and we'll not only knock $50 off the regular price, but we'll throw in a copy of Benjamin Graham's The Intelligent Investor, as well as access to the Fool's Stocks 2006, absolutely free.