For the Group, check these opinions out!!!
per THE BULL MARKET REPORT™ for WEDNESDAY,
February 24, 1999
---Todd Shaver <bull-market@erols.com> wrote:
THE BULL MARKET REPORT™ for WEDNESDAY, February 24, 1999
> Volume 14, #16
$$$$$ MICROSOFT TRIAL TO TAKE A BREAK
>
> The antitrust trial, which has dragged on months longer than
expected, will recess during the entire month of March and part
of April. The judge announced the new schedule Monday, citing previous commitments in other trials that he and the government's lead lawyer, David Boies, must honor. The trial will resume no sooner than April 12.
>
COMMENT: This will take the pressure off of Microsoft for a bit. Don't expect the stock price to explode though, just because of the good news. Remember, MSFT has doubled since the trial started.
>
************************************************************
LINUX VS. IBM DEPARTMENT - A CONTINUING STORY
>
> (This may bore some of you, but for those that own Microsoft and
are following the Microsoft/Linux story, it may be of interest. WE
learned a lot from this letter! If you're not interested, hit the “page down” key!)
>
> From: Robson, Robert
> To: The Bull Market Report
> Date: Tuesday, February 23, 1999 10:30 AM
> Subject: Linux vs. Win NT
>
> Todd,
>
> First, let me say that I've been a reader of the Bull-Market for the last few months and am profiting from the experience. My thanks on a job well done. I just read the question from a reader on the effects of Linux on the Windows market. I'd like to toss in my two cents worth.
>
> The Windows market should be divided into two segments: desktops and servers. The desktop is what most people use and does a great job of displaying their word processor, spread sheet, etc. It does this efficiently, gives most people what they want, and is a success. Servers are a different story.
>
> A server sits in the back room and performs services for other machines on the network. This typically involves heavy computation, whether it be serving out files, responding to database requests, or running a web server. These machines are installed, configured, and left to do their thing. While they have the familiar Windows GUI interface, people only look at it occasionally, when something goes wrong. Thus, servers are more concerned with computational performance than with the quality of the GUI. Since every machine on a network depends on the server, the server must be stable and not subject to crashing several times per day.
>
> Traditionally, servers were run by non-Microsoft operating systems on non-PC hardware. Only recently has PC hardware become fast enough to be considered for use as a server. Older servers were much more expensive than PCs so there was a great push to replace them with PCs. But what operating system should be used? Windows 3.1/95/98 were quickly ruled out due to their instability (when did your machine last crash?). Windows NT was designed to fill this niche. It is an entirely new operating system that shares little with 3.1/95/98. It is a preemptive multitasking, virtual memory operating system with protected memory, which is what is required for a server.
>
> Linux is also a pre-emptive multitasking, virtual memory OS with protected memory. Both Linux and NT are highly stable. Both have GUI interfaces. Linux will not run your favorite word processor. Microsoft wants a hefty fee for an NT server license. Linux is free.
>
> Microsoft will remain the undisputed king of the desktop. The battle with Linux will be waged over who runs the servers. There are still a lot of servers out there run by IBM and Sun. Microsoft is still gaining ground as people switch from more expensive hardware. I do not see Linux as taking current market share from Microsoft but slowing Microsoft's expansion into the server market. Microsoft will not be stopped since many people will never trust and use a free operating system.
>
> Linux will not take over the desktop. It will reduce server sales, but that is a market Microsoft is still moving into. Thus, the effect on Microsoft will be to reduce growth in a new area where they
are just developing a presence. It will not reduce current sales nor will it slow growth in areas other than servers. Thus, instead of making obscene profits from the server market, Microsoft will probably only make good profits. Still, there is one less area in which Microsoft can experience rapid growth and dominance.
>
> I'm not selling Microsoft yet.
>
> Robert Robson
> RobsonR@aecl.ca
>
************************************************************
Microsoft Musings
> By Joe Arena
> Editor
> The High Tech Arena
> February 24, 1999
>
> As the Nasdaq continues to rally and Microsoft's (MSFT) stock price is held hostage to the legal morass in Washington, long term investors would do well to take note of the many positive events of late which augur well for the future.
>
> First of all, the recent conference call was the most bullish in recent memory. We at the High Tech Arena have listened to Microsoft CFO Greg Maffei cry wolf at every conference call over the past few
years, but this time was different. We consider it extremely positive for him to guide analysts' earnings estimates upward for the current quarter. Not only did he say analysts' estimates for the quarter were too light, but he asserted they were short by "at least five cents." It was also very encouraging to compare Mr. Maffei's comments about Asia to the statement he made three months ago. Specifically, he referred to conditions in Asia as "terrible" on the last conference call, while he defined current conditions in the region as "tepid." Based on the conference call, most analysts revised their fiscal 99 earnings projections upward, with the highest estimate now at $2.40 per share. Several months ago, The High Tech Arena had revised its 1999 estimate to $2.55 per share, and we are leaving that intact. At the time, this number was looked upon by many as unrealistic, but it may very well be in the realm of probability for us to increase it by another 5-10 cents if the current quarter earnings surprise on the upside.
>
> Secondly, two interesting developments recently occurred which should give cause for concern to those who are already declaring America Online (AOL) the winner in a game which is only in the second inning. The $90 million that First USA ponied up to hawk its credit cards on MSN.com is not only an unprecedented sum of money, but also lends credence to the renewed marketing focus that Microsoft has on its Internet portal site business model. In addition, Microsoft's strategy to distribute 45 million Msn.com CD's via direct mail in conjunction with a television and print media advertising campaign is a good indication of their determination to get it right this time. As we have said before, Microsoft is first and foremost a company that succeeds due to their marketing and execution, not their technology. And those who would argue that America Online's brand equity is an insurmountable advantage fail to consider that this is only true in terms of the relatively minuscule 3% of the global population that is currently online.
>
> Finally, one of our key investments tenets at The High Tech Arena has always been never to buy any company that competes with Microsoft. (But please don't tell that to Janet Reno.) In a few weeks,
that philosophy will once again be underscored as Microsoft takes dead aim at Oracle when SQL Server 7.0 is introduced at Comdex on November 16. For the uninitiated, SQL Server 7.0 is Microsoft's revamped relational database software, which is designed to run mission critical applications for departments of big corporations and mid-sized companies. Mission critical applications are those such as financial, Human Resources, and procurement.
>
> The relational database market was a $3 billion business in 1997, with the UNIX segment comprising about two thirds of that, and Windows NT the remainder. In the UNIX space, Oracle dominates with a share of 60%, according to Dataquest, with Informix and Sybase number two and three with shares of 13% and 8% respectively. In the Windows NT market (now being called Windows 2000)Oracle still lead with a 42% share, with Microsoft second at around 39%.
>
> Why will Microsoft hurt Oracle in this business? The primary objections to SQL Server in the past have been related to scalability and reliability. Scalability relates to the number of users that can use the system simultaneously and in regard to scalability, Microsoft's product has proven to perform well with up to 2,300 concurrent users. This dramatically closes the disparity to Oracle's product, and is significant because there are few situations that require that many users of a database at one time. This makes Microsoft an even more viable competitor in smaller companies.
>
> Price is another tactic that Microsoft has always used so effectively in the past, and will be used to attack Oracle's market share. In the past, there have been instances where Microsoft has priced their competing product at 10% of the price being charged by Oracle. Expect that Microsoft will continue to use price as a major part of its strategy to buy market share.
>
> Despite the many positive things that are happening at Microsoft, many choose to focus on the rhetoric being spewed out by the DOJ. The bottom line is that this case will be decided by the Supreme Court, and a decision will not be made anytime soon. When a decision is rendered, the probability that it goes against Microsoft may be 50%. More importantly, if the decision does go against Microsoft, it is unlikely that any remedies sought by the court will have a material impact on Microsoft's earnings in the foreseeable future. Therefore, it makes sense for investors to focus on the fundamentals, which remain strong, and dollar cost average on any weakness in the stock price caused by the trial. And if you can find another company with $17 billion in cash, 91% gross margins, $3 billion in deferred revenue, and earnings growth of 25%, buy it.
I hope this made you smile....
Thanks,
Teflon |
