Microsoft (NASDAQ:MSFT) recently released its Windows Vista operating system to business customers and will release the consumer version this month. Vista and the Xbox video game console are just two of the reasons why investors are hoping for some big returns in 2007. So what will Vista mean for shareholders? And with the Sony (NYSE:SNE) PlayStation 3 doing some brisk business, will the Xbox still be a good play for Microsoft shareholders? I recently had the opportunity to talk Microsoft with PBS technology contributor Bob Cringely, author of Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition and Still Can't Get a Date.
Vista: Microsoft's new view
Mac Greer: Microsoft's Vista software has been released to businesses and will be released to consumers soon. Now, you have written that for reasons that have little to do with the product itself, Windows Vista simply can't lose.
Bob Cringely: Yeah. They [Microsoft] have OEM deals with every hardware maker. We can talk all day long about Linux, but it is still Windows that is shipped on 96% of computers. The new computers that come out are going to have Vista on them. If you upgrade to Vista, you notice they raised the price. Upgrading is expensive, and that forces people to buy new computers. The whole point is to get you to buy a new computer, and that computer is never going to have XP on it. It is always going to have Vista on it, so in 18 months to three years, every computer in America will be running Vista whether it is good or not.
Mac Greer: And you predict Vista will be the last core operating system from Microsoft. What does Microsoft look like in a post-Vista world?
Bob Cringely: Well, XP lasted five years, so a Vista world could very well be five to seven years from today, so that is a long time and a lot can happen to predict. But Microsoft basically proved that it was incapable of producing a new release. Nearly all of the goals of Vista were not achieved. They kept cutting back, kept cutting back, and so this is like -- Vista today is more like SP4.
Mac Greer: And when I first start using Vista -- is it pretty intuitive, or is it going to have me wishing for the old ways?
Bob Cringely: No, no, no, I think you will like Vista a lot. It has a nice interface. If you meet the hardware requirements it has, which are pretty hefty -- and that is deliberate, by the way, again forcing you to buy a new computer -- then I think you will be very happy with it. There will be problems. There will be instability issues. There will be service packs and upgrades and improvements and there will inevitably be a whole new raft of various Trojans and viruses that will attack this thing, and if they say that they are immune to it, they are lying.
Sony's PlayStation 3: More fun for Microsoft?
Mac Greer: Vista isn't the only game for Mr. Softy. It is also banking on its Xbox video console. Motley Fool senior analyst and Xbox owner Seth Jayson sees big potential for the Xbox, and he's not alone. You think that the Xbox will benefit from an unlikely source: the performance, or lack thereof, of Sony's PlayStation 3.
Bob Cringely: PlayStation 3 is in trouble. They are hurt by the [Blu-ray] diode shortage, and it is keeping the number of machines that they can ship down.... What gets games on a game platform is an installed base of hardware, and so the big winner here is going to be the Xbox. There are going to be 12 to 15 million Xboxes out at a time where there are two million PlayStation 3s. At that point, a developer is going to look at that, and they are going to say, "Well, why would I ever develop for Sony when I can have so many more customers on Xbox?" And that is gong to hurt Sony.
Want to read Cringely's thoughts on Apple, Google, XM, and Sirius? Check out these articles:
Bob Cringely expects big things for Vista and Xbox. What do you think? Share your thoughts on Microsoft and other stocks at Motley Fool CAPS, the Fool's stock-rating service.
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Mac Greer doesn't own any shares of Microsoft or any other stocks discussed. He's never owned a PlayStation or Xbox, and he longs for the days of Intellivision. Microsoft is a Motley Fool Inside Value pick. The Fool has a disclosure policy.
