Interesting exchange. A couple of notes on several points
raised therein.
>>2. Microsoft has more than offset R&D efforts with NT4.
>False.
Hard to get really interested in this given that no one
seems to have facts...and I doubt that Microsoft would
release the facts. The only way to look at this one to
me would be what would be the market price another company
(say, IBM) would be willing to pay for Windows NT and
would that market price recoup the NT investment.
>>3. NT growth is still 80%+ per year for a $2B product.
>3. Was, no recent data I know of.
Interesting thing here would be whether you think that
NT is a linear growth or exponential (either rising or
decaying) growth phenomenon. I read some IDC data the
other day that showed NT was going to slow down significantly
in the coming few years. Of course, as you note later,
big research firms are often wrong.
>>5. NT and Win95 serve different markets. People use NT because it is an awesome operating system.
>5. Awesome, NOT.
Hard to tell what the criteria is. Financially, NT seems to be
an awesome product. In terms of high availability and scalability
in large data centers, it seems to be much less than awesome.
Of course, as an investor what interests me the most are the
number of licenses sold and of course the revenue associated with
those licenses. And where I think NT is interesting is that it's
increasingly usurping Windows 95 sales -- which means a higher
ASP per license for Microsoft.
>>1. Look for Microsoft to grow 20% this year. End at 160.
>1. 20% growth in MSFT this year won't justify a P/E=50.
Of course, the question is whether Microsoft's earnings will
grow at a faster than 20% clip or not. My personal bet (with
which I'm sure you'll disagree) is that it will grow at a much
faster rate than 20%. This growth will be driven primarily by
two factors: increasing unit sales of PC's (due not to increased
overall PC sales revenue, but due to increased penetration of PC's
due to sub-$1000 computers) and faster than expected penetration
of Windows NT in the business market. Of course, this is
the fundamental point upon which everyone disagrees.
>>2. Win98 WILL ship in second quarter and WILL ship as designed.
>2. DOJ will kill Win98, look for Win99 or something completely
different.
In reading the proceedings, it's not clear to me at all that
DOJ will go after something as ethereal as whether the browser
can be integrated into the OS. To date, the argument has been
over whether two different products can be bundled. I doubt that
Klein and company really want to begin debating that at the
binary level -- I think that the retail viewpoint is where they
will stay. Again...just my opinion. |
