"What is the downside here? What am I missing?"
You will find the answers to your questions in previous posts here, but I'll refresh your memory. Just a few reasons to expect MSFT's downfall to continue include:
1. Momentum. A lot of MSFT investors are momentum investors who bought the stock not because of what the company sells, but precisely because the stock had been grinding upward so predictably. Now the momentum investors are selling because the stock has no upward momentum, and hasn't had any for months.
2. Mutual Funds. Microsoft has a huge institutional interest. Just a year ago, nearly every major mutual fund held piles of MSFT. Now the mutual funds have already begun selling MSFT like a hot potato.
3. Index investment. If you think that we're at the bottom of the economic cycle, or that the "New Economy" has overcome the economic cycle, than you can ignore this item. But for those of us who can see that the stock market has enjoyed an unprecedented rise over the past decade or so, and realize that exaggerated rises are ALWAYS followed by exaggerated declines, it is important that MSFT is now in both the Dow Jones and Nasdaq indices. Index investment has become hugely popular recently, and when people start selling these index funds, MSFT will be sold.
4. Fundamentals. For the first time since in memory, MSFT Operating Revenues were down last quarter. They did show a bottom line profit, and they can continue to do so for years because of their accounting leeway. For example, they can start declaring billions in depreciation on their software assets like IBM does (see "Cooking the Books" at pbs.org.
5. Product pipeline. Microsoft simply has no innovative product plans that are of any interest to consumers. All of their announced products are designed solely to protect their Ops and Apps monopolies. Nobody's buying Windows 2000 except for new system purchases. Microsoft's billions of dollars in "investments" to coerce customers to use Windows CE has been a failure. Every new product they've announced has already been done earlier and better by somebody else, without the Microsoft stigma and legal baggage.
6. Restructuring. Microsoft is going to be split up, and the reason they are fighting so desperately to prevent this is because AppsCo and OpsCo are worth less apart than together. Together, they have succeeded because people need both their monopoly OS and their monopoly apps, and you really can't buy one without the other. Sure you can buy a copy for Mac OS, but it has been used by Microsoft as a tool to keep Apple under their thumb. This simply won't work when the companies are separate.
These are just a few of many reasons. They are starkly obvious to those of us outside of the Microsoft campus, who haven't drunk the Kool Aid.
And no, I'm not paid to post this, nor have I a short interest. Like Charles Tutt, I'm just here to enjoy the show. |
