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TMFPostOfTheDay (< 20)

Up a Steep Hill



July 24, 2012 – Comments (2) | RELATED TICKERS: MSFT , NOK

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Board: IVS: Microsoft

Author: TMFinept

I happen to be in general agreement with Vitaliy here.

Microsoft's hope with Windows 8 is to create an OS that can run across a platform of products seamlessly. What they've ended up doing is, ultimately, delivering an interface to desktop computers that just doesn't make sense in that context and an OS to tablets that doesn't do what Windows consumers expect. Only a very slim selection of products (Microsoft Surface Pro tablets) will have the capacity to run full Windows 8 and use touch and traditional interfaces appropriately. Everything else will be a bit of a kludge.

This is not the seamless Windows experience we might have been hoping for. It's just a bit of confusing window dressing on what we've already had for 2 years, which is demonstrably not working as a consumer ecosystem strategy for Microsoft.

I expect that for most desktop and laptop computer users, the Metro interface will present nothing more than a confusing and undesired roadblock to productivity. Something you'll have to dismiss to actually get to work. Personally, I even prefer using the traditional Windows interface for passive media consumption tasks that Metro is supposed to optimize. If you already have Windows 7, you don't seem to gain much at all with Windows 8. I won't rush to upgrade my desktop.

If you're shopping for tablets, the Surface RT tablets don't offer full Windows functionality or anything that really sets them apart from Android and iOS competition. The Surface Pro tablets that do offer full Windows functionality will cost as much as Ultrabooks and won't be much thinner either, so you might just be better off with an Ultrabook. And, as I've already said above, if you're using a laptop you may find yourself wishing that Metro would just go away for good.

As for Windows Phone 8, well Microsoft just alienated Windows Phone 7 customers and developers by putting a hard upgrade line in the sand and starting from scratch all over again in terms of the underlying core of the OS. There are new features coming to the OS that will finally make it competitive with Android and iOS, but it's 2 years late and doesn't offer anything superior. Windows Phone 8 isn't likely to act as a catalyst for Microsoft in the mobile space - at this point nothing will because it's just too late. As I've said before, Windows Phone is now going to be a very costly, risky, multi-year battle of attrition not unlike Xbox.

Windows 8 won't likely be the sort of success that 7 was. Still, Microsoft has a really compelling line of business in the consumer space and it has a particularly compelling one in the enterprise space. I think the dividend is pretty juicy, that it's likely to increase and the company is likely still undervalued.

I'm not rushing to sell but I am not eager to hold on either. Although the cash generation is exceptional and the payout to shareholders is good, Microsoft is driving up a hill here that keeps getting steeper.

Vitaliy might have sold outright but I have been using covered calls to juice returns in the pursuit of an exit. With such a rangebound stock in such a volatile market, it seems like a great option to me. I'll eventually get my exit and in the meantime, I make acceptable money.


2 Comments – Post Your Own

#1) On July 25, 2012 at 2:15 AM, awallejr (28.16) wrote:

MSFT is just not worth investing in.  It has lost its focus ever since Gates left the helm.  Ballmer simply is over his head. Time after time he buys stuff that he ultimately winds up writing off.  It still sells enough software to generate income, but it is selling for around $30 for a reason.  And it has been selling for around that for YEARS.

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#2) On July 25, 2012 at 7:10 PM, iborg (< 20) wrote:

awallejr - You are so right.  I think it's been ten years that MSFT has been selling for around $30 [maybe at $28 10 yrs ago].  For a company of that size - dictating a huge amount of leverage, resources, et al - not to be able to do any better for shareholders is unacceptable.  It doesn't deserve investment. 

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