Gates Back In The Saddle
For
an evil, vicious and non-innovative monopoly, Microsoft
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sure seems to be churning out a lot of fun and innovative products that people
are lining up (literally) to buy. I did a little Peter Lynch-style stock
analysis yesterday by dropping by a Best Buy to see what sort of impact the
newly freed monopolist was having on the consumer technology business, with its
release of the much-anticipated Xbox.
Well, for one thing,
there were no signs of any X-boxes other than the few in-store demonstration
models. According to one worker, the store blew out its 100-plus share allotment
within an hour of the store opening at 10:00 a.m. Anyway, I wandered over to the
demo model and had a look. All I can say is “Wow.” It was pretty
impressive with extremely lifelike graphics. (Are monopolists allowed to create
fun games that everyone wants? — I’d better check with Judge Thomas Penfield
Jackson.)
It looks like
Microsoft has a hit, and even though they are apparently losing $100 on every
Xbox they sell, (price is $299), they are obviously launching a smart long-term
strategy that could eventually become a “killer app” for the broadband
revolution. I guess you can set up Xbox to play against your friends online even
if they are somewhere else (and it even can play regular DVDs with an
inexpensive upgrade).
While this might
sound like a commercial for Xbox, it just goes to show that those guys up in
Redmond really know what they are doing. Microsoft’s stock market action speaks
for itself, with a year-to-date gain of 52%. Microsoft’s apparent victory in its
long antitrust war is also likely helping drive the re-energized Nasdaq, which
is within striking distance of its 200-day moving average.
The successful
launch of Windows XP has also been a positive development for Microsoft, as has
its Pocket PC product introduction. Microsoft’s upgraded MSN 7 is getting decent
reviews and will likely become a fierce competitor to AOL. Apparently, MSN
membership has surged to 7 million (a two-year doubling) and will likely attempt
to lure away some of AOL’s 32 million customers.
Mr. Softie not only
looks solid technically, but its fundamentals have also held up well during the
20-month tech swoon. Revenues over the last 12 months have grown 10%, while
earnings fell by 2%. That’s not too bad a performance given the total meltdown
in techland. Microsoft’s trailing 12-month PE remains at a fairly low 37, and as
tech continues to recover, Microsoft will likely remain a performance leader.
As for the case by
the government against Microsoft, it took a new President and an economic
collapse to call off the dogs. To this day, the only people I can find that are
furious about the decision are Sun’s Scott McNealy and Oracle’s Larry Ellison.
(Not to mention the parasitic army of antitrust attorneys.) Even Rosie O’Donnel
gave Gates the thumbs up when he appeared on her show Thursday to promote Xbox!
They used to say
what was good for General Motors was good for the country. Well, the same goes
for Microsoft today, but in this case, what’s good for MSFT is good for the
Nasdaq. It’s nice to see MSFT back in a solid uptrend above its 200-day moving
average, possibly leading the way for the broader tech arena. Also looking solid
of late (back above their 200-day moving averages) are Intel
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Have a great
weekend.
Dan