JFDowd - I don't think the stupid permatemp tempest in a teacup had any impact on MSFT trading today. After all MSFT was up most of the time - it broke 81 - as long as the market was positive. If the case was so negative, it would have tanked right away. It only sold off together with the market. Second, I really would be surprised if the most dire case scenario of 10K former temps getting huge gobs of MSFT stock came to pass. In the worst case, it will be a limited number, and the resulting damages a drop in the bucket as far as MSFT is concerned. Incidentally, if they are going to go after MSFT in this way, then the negative implications will not be confined to MSFT but across many high-tech industries; no reason why the market should single out MSFT for punishment on that account.
<<How many more initiatives can they announce. How many products to they have to have coming down the pipeline?>>
What "initiatives" are you talking about? If you are talking about the cable and wireless investments - then that simply will not cut it. These *may* be good moves (and emphasis is on *may*) from a long term strategic point of view. But they strike many as at least partially "hedging" moves, rather than a part of some very clearly articulated strategy for generating a revenue stream. They want to have "access" to broadband. What for? Given the money they invested, if all they get out of this is some extra sales of CE, then the return on investment is definitely not worth it. Further, almost nobody believes that MSFT will achieve the same dominance with CE that they got with the desktop O/S. And anything short of it, does not justify the investment (they get $8-$15 per copy of CE).
MSFT talks a lot about the "multimedia stream of tv, video, data, audio interactive" aspect of the future that'll be piped through broadband. Frankly, they've been talking about this for years and years, even before the internet exploded (and escaped their notice early on). There is a lot of scepticism, well justified scepticism about this - a bunch of tech heads musing about the future. These things almost never work out like that. Attempts to have a truly interactive TV set-top functionality has been attempted (by Time Warner cable f.ex.), and was a huge flop. It has the same smell about it as the famous videotelephone which AT&T have tried to get off the ground through the years - and consumers consistently turned a cold shoulder to. In any case, vague plans about how MSFT will dominate this "mulitmedia stream" are just that - vague.
Bottom line, all these announcements about deals with T, and investments in Britain etc., are not something that you can point to and say: "this concrete PRODUCT, or SERVICE will generate a revenue stream of XYZ dollars per year, growing to XYZXX over time" for MSFT. MSFT seems to be hedging their bets "just in case" this transpires to be an important part of data processing and MSFT doesn't want to be locked out. Will it actually be the case? Who knows. I don't believe even MSFT can *CONCRETELY* say so. It may turn out to be one of those things that seemed very important at the time, but was bypassed by other technological developments. Or, even more likely, you can make money, but rather on the content side of it, or service side, in which case it is unclear how MSFT profits from it. After all they presumably are not looking for cable subscription revenue, or not looking for a cable operator's business (or more broadly AT&T's business). Who knows - this may be better than letting your cash hoard rot at 5% interest a year, but it is not clear that whatever they come up with in these deals will have the profit margins that justify such an outlay of capital for the return they get.
Whatever the case may be - again, all these deals cannot point to a concrete revenue stream that can be projected over the next year or two, cannot be factored into the EPS, cannot be estimated as a future market at all.
No wonder the market is not terribly excited by it all. Frankly it has a feeling of almost random and desperate flailing by the boys in Redmond who are sitting on a mountain of cash. Their core business is under technological challenge, and they don't have a blueprint for the future. They are hedging their bets by throwing cash at whatever seems hot at the moment - having been burned by missing the first internet train.
OK - this is a pretty dark characterization, and somewhat exaggerated, but I'm trying to paint a picture of what I believe the market sees. And that is my explanation as to why these initiatives are not going to be rewarded by a climb in shareprice.
So, in answer to your question - the kind of announcements that will make a difference, are things that let us define a market, a product, a service whose potential we can at least roughly factor in EPS growth. Or which indicate a **CLEAR CUT** competitive advantage. Or which display a coordinated, focused, thought out-strategy.
Morgan |
