How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 459.86

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Jan 16 9:30 AM EST

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To: dybdahl who wrote (63200)	11/20/2001 6:46:02 PM
From: Bill Fischofer	Read Replies (2) of 74651

Re: Colgate business model Good question. Soap suds, toothpaste, etc. are what are called "consumer non-durables". They tend to be a low-margin but very steady and recession-proof business (people are still going to brush their teeth regardless of the state of the economy). The point is that repeat purchases are guaranteed because unlike software the product is "used up" by the act of using it. The way margin is added is through branding. Tide is more profitable than generic detergent because Proctor and Gamble spends millions to create and maintain a "brand image" of "whiter whites and brighter colors" in consumers' minds. The rule of thumb is that it costs upwards of $100 million to launch a major new consumer brand in a category like this, which is why few are prepared to do so. Unfortunately for would-be Linux entrepreneurs, software is not a consumer non-durable because you "buy" it once and you're done. The reason everyone wants to get into the "software as a service" business is because that would attach a steady revenue stream to software. But the jury is still very much out on whether this will be accepted. Right now the major "recurrance" is via OEM sales as consumers buy new PCs every so often to replace their old models. You can rest assured that if Linux were ever to enter the consumer mainstream that the DELLs of the world would use their own distributions to save money even if the Red Hats and SuSes of the world were only asking a few dollars per copy.

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