Microsoft Death Watch

Last week an Apple Store opened in Newmarket Ontario. I haven’t seen it yet, but my wife and daughter mentioned that there was a line up out the store and down the mall, so it looks like it may be servicing a pent up demand. A demand that I wouldn’t have thought would exist. Yes, Newmarket is a relatively prosperous city, but it’s not what you would consider a progressive city. I know that when I’ve been there, my MacBook gets a lot of stares, and I’ve had to answer a lot of questions about it. Things like yes, it really does work, no it doesn’t get virused, no, I don’t need to use Microsoft Software for anything. I point out to those who ask that since I’ve dumped Microsoft I’ve been way more productive, between running OSX on my laptop, and Linux on my desktops, and no, there’s no way I would ever touch that Eatoin Shrudlu piece of garbage called Microsoft Windows.

That Apple is doing this (opening their sixth store locally) at the same time that Best Buy and Staples are also selling IPads, IMacs and Macbooks is interesting. It indicates that sales must be doing really well, which of course is eating into Microsoft’s OS and Office Suite share. Just think – when was the last time you heard anything about Microsoft’s own retail stores? If Microsoft retail store sales were doing well, they would have made damned good and sure that we’d heard about it.

Since it’s introduction, Apple has sold five million plus IPads. This has had an affect on the Notebook market. While some IPad buyers are existing Mac users, others are probably making their first major Apple purchase (I don’t consider an IPod a major purchase). Microsoft, which has been pushing the tablet computer market for close to ten years now, and has been unable to sell a decent number of tablets. Several OEMS who had planned Microsoft Tablets have dumped the idea for Android. Hewlett Packard even showed a Windows Seven tablet at a trade show, and then less than a month later announced that the product was being abandoned for an Android OS tablet. Microsoft must have been furious. At present is appears that there may not be any Windows Seven tablets released, everyone other than Apple seems to be moving towards Android or some other Linux variant. Windows for Tablets is a miserable failure.

And of course Microsoft is once more pushing a program to pay people to use Bing. That they need to do this indicates that they are having a hard time keeping users (never mind gaining any).

Last night one of my connections told me that Oracle is working really hard on the next version of Open Office. He isn’t close enough to the situation to have solid details, but he was told that Oracle is aiming to take Open Office from good, to fantastic. If Oracle manages to do this, it could do a huge amount of damage to Microsoft, as Microsoft’s main cash cow is Office. And of course ever office suite installation that Microsoft loses to Gnome Office, Google Docs, IWork, KOffice, OpenOffice, Word Perfect Office, and that other available alternatives has a major impact on profitability.

In the fall of 2009 I predicted that Microsoft would enter Chapter 11 Bankruptcy Protection in five years, based on my reading of their United States Security and Exchange Commission filings. That was before I was aware that Microsoft was in debt – my thanks to Dr. Roy over at Techrights for digging out this information. Attempting to fully evaluate Microsoft’s current financial health is difficult. The company regularly moves products from one division to another. While other companies also do this, in Microsoft’s case a lot of the moves appear to make to have no rational basis, leading me to believe that Microsoft is doing this to hide the true financial health of the company.

So at present I’m not going to try and refine my estimate further. I have seen nothing that leads me to believe that the company has taken any substantive actions which will allow it to avoid bankruptcy. If you own shares in Microsoft, you should seriously evaluate your position. If I am right, holding them could be dangerous to the health of your portfolio. If I’m wrong, now might be the perfect time to pick up some cheap.

There is one important product release coming up. Microsoft will be releasing Windows Phone Seven shortly. Based on the timing, I believe that success or failure of the Windows Phone Seven product line, will be a solid indicator of the success or failure of the company as a whole.

Regards

Wayne Borean

Friday September 24, 2010

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