Boot Battle Could Burn Microsoft? Believe It!
Posted by Tiernan Ray, Barron's, July 17, 2006
I spoke with Canaccord Adams analyst Peter Misek, who covers Microsoft (MSFT), today, and found him surprisingly upbeat about Apple Computer (AAPL), a stock he doesn’t formally cover. Misek says that not only should apple do well with its recently released low-end MacBook laptops — selling a half-million or so in the quarter — but the company poses more of a threat to Microsoft than some may appreciate.
My colleague Mark Veverka writes in the latest Barron’s Magazine that Apple could see its market share rise from 4% or so of all PCs sold worldwide to perhaps 15% or more in ten years, citing analyst Charlie Wolfe with Needham & Co. That’s mostly because new Macs will ship with a program called “Boot Camp,” which lets Mac users run Microsoft’s Windows as well.
Misek sees something else: the potential for a large shift to Apple’s software, the OS X operating system, and away from Windows as the latest version of the latter continues to face delays.
Misek’s been checking with software developers who are testing the latest version of Windows, dubbed “Vista,” which is expected sometime in the first half of next year. Misek says the feedback about the product is “not great,” with many reports of bugs remaining in a product that is on an accelerated release schedule. “Microsoft’s trying to ship the product in a much shorter time frame from the first beta [i.e., test] release of the program than with earlier versions of Windows,” says Misek.
In order to get it right, Misek thinks Vista will be delayed for the umpteenth time, and that Microsoft’s earnings per share for the year ending next June will fall short of consensus estimates of $1.38 per share and closer to his estimate of $1.29 a share. With Microsoft’s close today of $22.48, Misek says his $28 target on the stock is “under review” and may be ratcheted down. “This is one of the other shoes that has yet to drop,” for Microsoft, Misek says of the potential delay — the other shoe being a wholesale shift to Apple’s software over many years.
Whew. Well, we may know as soon as Thursday, when Microsoft announces fourth quarter and full-year results for this year, providing they give “guidance” for next year. |
