Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Friday, October 06, 2006

Microsoft Holders Need to Read This

CNET.com has an article this morning and the implications are interesting. It questions whether or not the Microsoft (MSFT) release date for Windows Vista will really be launched on time.

It noted that Rick Sherlund of Goldman Sachs sent a note to clients Wednesday saying that its Vista launch date was on time. Here is what we noted about Rick Sherlund's comments on September 15 where he moved his Windows Vista launch date up to Late January to Early February.

But this article on CNET is saying that analysts at Gartner believe that Microsoft could benefit by delaying Vista until Easter. Gartner is not an investment bank, they are technology analysts and a technology research and consulting firm. So they aren't embedded with an inherent conflict of interest compared to any of us in the markets because they aren't trying to generate commissions and they aren't vying for investment banking fees. Back in September Gartner had said that a number of factors make it more likely Microsoft may delay the launch of Vista until at least May next year.

This has bad implications for Microsoft (MSFT) stock IF it is true, and would have even worse implications for the PC makers and everyone down the supply chain for the PC makers.

If Vista is delayed again and this close to the hoped for launch dates, it will not be good for MSFT at all. That would put all the revenues off yet another quarter and would agitate a software consumer even further. Maybe Gartner thinks the consumer will just deal with it with no issues, but the investment community would not give the company a pass. If you are a shareholder in Microsoft (MSFT) or in any of the big PC makers, it goes without saying that you want Rick Sherlund to be right and you want Gartner to be wrong.

Both Gartner and Goldman Sachs agree that there is no technical reason why Vista should be delayed. The difference of opinion between the analysts focuses on issues like the role of the European Commission. If this is just over the European Commission then this is the tail wagging the dog. The EC has been on Microsoft harder than the US ever was, and whatever Microsoft does down the road that situation is one that will probably continue for the next decade. The EC and Microsoft battle seems more personal and retro to me as an outsider looking at global issues and trends, and they should not risk a delay just to placate European regulators.

The article points to Microsoft's appeal of a $350+ million equivalent fine, and that it would make a delay convenient. Lets double, triple, or quadruple that fine on a theoretical basis. What the company would lose in market capitalization alone would dwarf that fine many times over.

Jon C. Ogg
October 6, 2006
 Subscribe

Powered by Blogger