Microsoft: A Solid Long-Term Play

By Maxwell Fisher - April 24, 2012 | Tickers: AAPL, MSFT | 0 Comments

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The stock of Microsoft (NASDAQ: MSFT) has trended slowly upward for the past year despite broadly expressed sentiment that Microsoft may be more a corpse than a corp. The premise is that as goes the personal computer, so goes Microsoft's operating system.  If the body's demise is so imminent, the brain must be dying too.  That brain is in all the PCs except the MAC of Apple (NASDAQ: AAPL). 

However, reports of the PC's death are highly exaggerated, in my opinion.  That is the current opinion also of one who was among the first to suggest the opposite. The PC and its Window's operating system are alive and well and are in lively attendance at their own funeral; like Mark Twain's Huck Finn and Tom Sawyer, an episode of the latter's Adventures.

Interestingly, the MAC, also a PC, seems never to be included in the PC death notices.  I believe the reason for its exclusion is that its maker, Apple, is deemed to be on the move, ever innovating.  That masks the MAC's true nature, whereas, those machines that are lumped together as PCs are made by much less stellar, if not all problematic, or foreign performers—Hewlett-Packard, Dell, Acer, Lenovo, and Asustek Computer, the big four. 

Tim Cook, the new CEO of Apple talked about the post-PC world and showed slides, literally and figuratively, of these four major PC providers.  Although, the slide shows 300 thousand more iPads shipped than HP in the last quarter, the slide also shows 49.9 million PCs shipped by the big four.   In making his point, Cook also left out Apple's MAC (5.2 million) and also the VAIO (2.6 million) of SONY.  Had he not, the comparison would have been 15.4 million iPads to 67.6 million PCs shipped.  PC sales rose, albeit unexpectedly, in the quarter after the quarter upon which Cook's comparisons were based, to more than 89 million PCs.  Like most everything else, much of last year's PC downturn can be attributed to the European debt crisis.  Taiwanese flooding and Japanese tsunami, earthquake and radiation delayed obtaining computer components and parts and wreaked havoc with manufacturing and shipment schedules, thus reducing shipments too.

 Admittedly, my personal use of the computer, a Sony VAIO PC, is facially like my prior use of its predecessor, that museum relic, the typewriter, specifically, a Hermes 2000, which my college fraternity brothers dubbed the Hernia 2000 because of the heft required to lift the carriage for capitals with the mechanical shift key. That exercise option, of course, was eliminated by the "shift" tab;  the need to change paper at every page unless you rolled on like Jack Kerouac writing On the Road eliminated by the computer screen and the "print" or "send" tab.  My Hermes is long gone.  May it rest in peace in some Heaven for the Obsolete. But typewriters are still being manufactured and sold, apparently, especially, if not exclusively, to cops and convicts.

Given what I know about the supposed alternatives as well as my use of my PC, a lap top admittedly, I cannot join in the death knell for PC or Microsoft. Admittedly, I use my PC for productive work primarily, mainly writing and researching. I could do the research on one or more of Apple’s Ps— the iPhone or the iPad—but I have not heard or seen anything that suggests I could do the writing on them.  My accountant friends assure me that they could not do their financials effectively on any of those devices either. Of course, we make our assertions to each other on our cell phones, including Apple's iPhone, and the Blackberry of Research in Motion. 

So we get to my conclusion, which is that those devices, the iPad and the iPhone are useable mainly for communication rather than creativity. Throw in the Nook of Barnes & Noble and the Kindle of Amazon to that category.  Their primary communication is entertainment.  Their primary purpose is to give the consumer access to the final product of the creator, who has to have the PC to create the product communicated.   So, without qwerty PC, perhaps, the only grist for the Ps would be contemporaneous chit chat and writing previously created and available in the Internet library.  Given that scenario, the PC cannot be dead. That means that Microsoft's word processing is not dead.

Having so concluded, I must report that Microsoft itself may not fully subscribe to my conclusion.  At least it is showing dissatisfaction with just sitting on its laurels and awaiting its own beatification in the Temple of Bygones by attempting, with its recent announcement of acquisition of AOL patents later this year, to reposition itself atop Mount Olympus with Apple and Google.

From AOL, Microsoft is buying more than 800 patents and application.  They will enhance Microsoft's presence on the internet, perhaps, sufficiently to compete with Apple and Google.  In its examination in support of efforts to shop AOL's portfolio, Envision IP discovered patent rights which could permit Microsoft to compete effectively and possibly challenge in litigation the dominance of Google and Apple in their respective spheres.   

Meanwhile, Microsoft continues to improve its operating system.  It has just introduced Microsoft System Center 2012 to IT professionals for evaluation and purchase, which will create private clouds. Presiding at the Microsoft Management Summit was Corporate Vice President Brad Anderson.  He was well-tanned and casually dressed.  He reminded me of Steve Jobs, except that Brad was wearing a grey sweater, grey cords and grey loafers instead of Job's sloppy top, jeans and tennis shoes.  He announced to the 5,000 IT professionals assembled that later this year Microsoft would introduce Windows Server 2012, the new cloud-optimized operating system. 

Moving more slowly back up the mountain than Apple and Google, not slipping so much as they might from day to day, Microsoft continues without its death defying leaps and bounds to be a good long term investment.

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