How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 478.53

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Dec 12 9:30 AM EST

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To: Hal Rubel who wrote (8041)	5/27/1998 1:45:00 PM
From: Carlos Blanco	of 74651

>RE"Dominant firms like Microsoft can only remain so if they are truly competitive." Competitive? If it does not have competitors, how competitive is it? What competition does Microsoft permit on Wintel boxes? Just who is the competition? I keep forgetting Even if there are no directly comparable alternatives to a product, competition always exists in the form of available capital. Capital will flow to where profits can be made. If Microsoft ever charges an excessive premium on anything it sells, you can expect alternatives to arise to take advantage of such a pricing discrepancy. Where "excessive premium" equals the R&D and manufacturing costs of a product that has the required functionality to act as a substitute. In the case of Windows, there are over 10 years of R&D built up into the product, hence it's not surprising that priced at $109 no one is currently interested in developing a substitute. This is the expected marketplace behavior. The three variables that determine the likelyhood of additional entrants are whether added Windows functionality also adds value as perceived by the consumer, whether consumer functionality demands go down or up (eg. bare-bones internet browsing could become sufficient, in which case the perceived value of Windows goes down), and whether the price of the product rises or stays the same. Again: there will always be competitors to any product as long as capital exists and can be freely deployed. The only time capital can't enter a market is when someone has been granted special status as enforced by the government (regulated monopolies, patents, etc.). >PS: This article relates in part to J. P. Rockefeller's Standard Oil by claiming that it was a model corporate citizen. None the less, Standard Oil took the big fall. This raises the alarming question: Are good intentions even relevant as a defense when a Monopoly grows beyond a certain size? Whether intentions will be relevant or not is highly subjective; the judge(s) are the individuals who will get to make make that decision. Presumably the judicial system will come to a fair conclusion. If we can't depend on the judicial system reaching correct conclusions most of the time, we might as well go live somewhere else. --Carlos

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