Microsoft: In Good Company
Jane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Even before Microsoft announced its 17% or $300 million investment in the Barnes & Noble Nook, it was giving off dramatic signals that it was back as a contender in high tech. By partnering, copying, and ignoring the supposed death of the PC it could cause a crisis of confidence at Apple, Amazon, and other players in the digital space.
For example, a funny thing happened when I went into the AT&T (NYSE: T) wireless retail center on Universal Drive in North Haven, Connecticut. I intended to purchase a Google Android or Apple iPhone smartphone. I walked out with a Nokia Lumia 900 which has a Microsoft (NASDAQ: MSFT) Windows operating system (OS).
The Lumia had been heavily advertised on local radio as being at AT&T retailing for about $50. That led me to ask about it, assuming the mobile operating system was Android. The iPhone OS had not been mentioned in the commercial. The sales representative sweetened the incentive with a $100 rebate on the phone and activation fee. I jumped and handed over my credit card. As the order was being processed, I casually asked if the OS was Android or iPhone. It was then that I found I was back in Microsoftville. Since Microsoft had just announced strong earnings for 3Q and its shares were up 4.5% to about 32, I was not worried enough to cancel the order.
After all, a major corporation like AT&T was partnering with Microsoft. As our mothers had taught us, you judge whatever by the company they keep. AT&T stock is at 32.69, with a 52-week range of 27.29 to 32.75, or near the top of its game. From experience I knew that AT&T, at least its wireless branch, would be right there in brick and mortar to provide post-sale service. That reduced the risk. It's also unlike some of the freestanding retail operations, such as Wireless Advocates at Staples, which are not housed in a major carrier’s corporate store location. And, yes, it turned out the AT&T retail staff was there for me as I, a digital immigrant, returned to the location a few times as I adjusted to the features.
But I remained wary. Would I be stuck in a two-year wireless contract with AT&T with an OS which would be ignored? Would fewer apps be developed? Remember those orphan word processing systems and PCs? Since then I have factored in how long a device would be around. However, it only took a few days to overcome any buyer’s remorse.
To begin with, for an aging Baby Boomer such as myself, the learning curve was not as steep as it could have been with the Android or iPhone. That’s because I am familiar with Windows. So, to me, working with the handset eventually seemed intuitive.
Secondly, there is a smooth interface with leveraging the smartphone as the way I can connect my PC laptop with its Windows OS to the Internet. AT&T non-wireless shut off my DLS line in error. AT&T Wireless gave me temporary Internet access through the smartphone. I may decide to pay the premium price for that (about $150 monthly extra) since it seems faster than DSL, at least faster than the service I had and 100% portable. The argument against that is that AT&T now has a special promotion of the super-fast DSL for about $20 a month, for 12 months.
Third, some stock watchers, such as "Gutone" whose expertise is assessing the value of companies, predict that a Windows based mobile OS will compete with Android and iPhone. Right now it has less than 5% of the market but could have 15 to 20% market share by the end of 2013. Obviously, Windows Mobile could become the third player. Already fading are Research in Motion's Blackberry and Palm's WebOS. In addition Nokia's own Symbian came and seems gone.
And, fourth, it’s in my self interest as a financial writer to get up to speed on this platform. When Microsoft brings out Windows 8 late this year, Windows 8 mobile could be the big story. And not only in phones but also tablets. Delicious to cover will be the development that the Nook is competing with Microsoft's own tablets.
Microsoft has also moved into retail. No question, this is blatant copying but that’s the way of the world in high tech. For instance, it’s common for developers to change just enough features on a product to prevent a patent lawsuit. So far, Microsoft has 16 retail centers where it is introducing customers to its innovations ranging from its phone to the Xbox 360. More will be rolled out in uspcale locations. Those settings, like Apple’s, allows both high tech experts and influential amateurs to inspect the features, play with them, and talk with each other as well the trained sales staff. In themselves, that hands-on experience with the products and a sense of community with other “fans” – that term might be due – can restore the company’s branding as an innovative leader. Could Microsoft achieve cult status like Apple? It's possible.
Another development which has put the wind at Microsoft’s back is that the PC isn’t dead. Although the late Steve Jobs predicted that was inevitable, it hasn’t happened. About 89 million PCs were sold during 1Q of calendar 2012. There is plenty of excitement about Windows 8 for, yes, the PC, in addition to phones and tablets.
Microsoft remains at the same price since it announced earnings. It could be the time to buy it before it takes off toward the end of 2012. As for Nokia, credit rating agency Fitch reduced its rating to junk. The stock of its partner Barnes & Noble is way up.
janegenova has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, Microsoft, and Staples. Motley Fool newsletter services recommend Apple, Google, Microsoft, and Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
