Using Google Finance, I’ve charted the performance of Microsoft stock as compared to Apple and Google marked to the April 28 date of my first post on the subject. I think the results speak for themselves:
MSFT compared against the other two is up 3.16% while Google is up 11.05%. Apple is up an astounding 28.66%!! Of the other companies I mentioned before (Oracle, Yahoo, and Novell), only Yahoo is down (by a large percentage, too – 5.23%).
Why is that?
To be honest, I think the detailed article is for another day. But I will say this: Microsoft does not seem to have the “magic” that Apple and Google have when it comes to creating products that people desire. Value, possibly. Desire? I don’t think so.
What is desire? Well, in many a modern times, it’s considered something that is hip, cool, buzz worthy, popular, status/class defining, and fresh. Apple certainly has it: they changed the way we live with the iTunes music store and the iPhone; iTMS is now the 3rd largest music retailer and the iPhone sold 525,000 units almost overnight! Google is also desirable. They have a coolness factor that seems to come naturally; they continue to integrate and innovate by buying up DoubleClick, GrandCentral, and others. They also improve their other web apps like Picasa and Book Search.
And what of value? Well, I would argue that both Apple and Google provide value. Apple’s iPod, while desirable, is also valuable. Forget the money part for a moment and focus on the ability to watch your favorite TV show on the Subway or carry your entire music library with you. Google provides value, too. The ad engine is amazing. But the consumer gets value as well. They get the fast, accurate search and a (virtually) spam free inbox, flexible calendar, and portable RSS reader.
Now what about Microsoft? Well, I think they do add value. Microsoft Office is, I have to say, the best office suite around. I’ve seen OpenOffice and Google offerings. And while those free options are good, nothing beats Excel. Word is ok – it does what it needs to do. PowerPoint does the job, too, and so does Outlook. But the value in having all those apps work well, together, provides value. The $350 it costs for one license is small considering the productivity it provides – even to home users.
Their bread and butter of the home world, Windows, does provide some kind of value. It is the most common. It works with the most hardware. And it plays games and runs 85% of the worlds software. Although you could get into a chicken and egg which came first thing, I don’t think it matter much. The fact that Windows is out there provides value.
But that’s about where it ends.
In my opinion, Vista doesn’t provide any extra value for someone to upgrade. The security aspect is debatable so let’s not even go further on that. But the other features, Aero with the glass interface, is not essential or even useful; its eye candy and that gets old quick – even I think my Aqua UI on the Mac is old. Plus, the DRM could cause more problems than it solves. Debating DRM, like security, is long and subjective so we won’t go further. But, suffice it to say, it doesn’t work the way Microsoft intended; people are hacking it left and right. And the games that were supposed to be exclusive to Vista, are now running on Windows XP. Clearly, there is value in keeping XP over Vista in that example. Moreover, businesses get almost nothing of value by upgrading.
Now take Office. I’ve already said Excel is great. But do I need Excel 2007 or 2003? Well, both do what I want – create graphs & charts, manage my finances, and help me visualize my risk analysis reports for work. Word 2003 still has a darn good spell check and PowerPoint still does presentations. Why pay to upgrade when I have what I need. There are no no features in Office 2007 (besides a new interface that some say is unintuitive) that makes it valuable enough to upgrade.
Do people desire Microsoft? I didn’t rush to get a Zune. And while I know people who did rush to get an X-Box 360, Nintendo’s Wii is the most desired console – you still can’t get one easily! Who desires office? It’s a tool, not a status symbol.
So, at some other time, we can get into the balance sheets, EPS comparisons, market cap, and EBITDA, but I think the stock price shows that all those things don’t matter as much as you would think.
James, I think I’ll be better off without Microsoft stock in my portfolio.
I don’t think your looking at this correctly, I didn’t read this entire post, but I read the one from April.
Basically, if you sold MSFT short, you would have lost the 3% plus fees…So how would that have been a good idea? (although check again in your 8 months, who knows) I’m not saying your wrong or right. But MSFT should have been bought last summer/fall (for certain reasons), but not necessarily sold yet. Your looking at it from a biased opinion and a gamble, instead of valuing the company and comparing your value to it’s stock price. You gave no reason why MSFT wasn’t worth it’s price and therefore the market would correct and lower it, we just know that you like ipods and google earth and not windows.
PS: their cash is very important, each share outstanding has about $3.60 in cash/Sh. Term Inv. tied to it. So really your looking at a price of 26.25 (29.85-3.60, 7/9/07) for their operations, I’d say looking at MSFT’s cash is very important when making a stock decision…
to clarify what i meant above by the “opinions”
It sounded to me like a “why you like google’s and apple’s stock more than microsoft” but not necessarily a “why you think microsoft’s stock will go down,” that’s all
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