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As Microsoft Goes, So Goes the Nation?

By Rick Ackerman Posted on October 26, 2009, 12:01 am EDT Last Updated October 26, 2009, 2:21 am EDT

Although the Wall Street Journal’s classy copy desk deserves praise for adapting so quickly to the paper’s tabloid transformation under Rupert Murdoch, the headline writers appear to be struggling to find a balance between truth, sensationalism and, in this case, wishful thinking. Here’s the headline — and see if you can spot the dereliction of syntax: “Microsoft Feeds Hopes for a Recovery”.  Did you infer that the hoped-for recovery  supposedly being fed by Microsoft encompassed the broad U.S. economy?  We did too, since it was logical to think that’s what the headline meant. After all, who among us knows a single person who even remotely cares whether Microsoft itself recovers from its Vista-induced kamikaze dive? 

  Ballmer 

Turns out we were wrong, for it is solely Microsoft’s recovery that is being hoped for (presumably by Steve Ballmer and the population of Greater Seattle, if no one else). Nowhere in the article was there any mention of hopes for a broad-based U.S. recovery. Nor did the article speculate on whether Microsoft, the General Motors of the software industry, might help pull the rest of the economy out of the hole. Alas, we are left to hope only that the fortunes of the Redmond software behemoth continue to improve. Considering that with each new version of its operating system, Microsoft continues to lose ground to its competitors, Americans might have more to gain from hoping that McDonald’s expands its breakfast menu in 2010 – or that the Chicago Cubs make it to the World Series. 

A Disconnect

Concerning the Journal’s perennial state of hopefulness, the disconnect between headlines and news stories has become all too typical of the newspaper’s reportage on the supposed recovery. Mainly, it’s a matter of the stories failing to justify the bold headlines associated with decidedly sketchy “green shoots” items. This latest story fails to persuade, even, that Microsoft’s revenues are back on track. In fact, the company’s earnings for the last quarter were down 18 percent. Savvy investors lost no time pushing MSFT’s share price up more than 5 percent on this piece of fabulous news. But this was to be expected, since, amidst green-shoots mania, during which common sense and logic have routinely been stood on their heads, the worse the news, the more bullish the spin. 

The supposedly bullish side of this story was that Windows 7 sales look promising, driven by what the Journal described as “strong consumer appetite” for the product. Oh, really?  Maybe it’s strong in comparison to demand for the emetic Vista operating system. But we find no reason to “upgrade” from XP ourselves, since Win7’s only selling points are that it corrects Vista’s egregious flaws, and that it creates a user interface that is somewhat less boring than in the past. These factors have understandably failed to stimulate business sales, however. Microsoft thinks it’s because businesses have been stingy about technology spending in the recession. While undoubtedly true, it’s only half the reason they are not rushing to upgrade.

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  • Geoffrey Gangel October 31, 2009, 6:59 pm

    I shiver to think of all the missteps we can make without the pitfalls others dig for us so this is an activation key to paranoia. http://www.deepcapture.com/tag/paramount-capital/ I like this site you may find it intriguing.

  • Dave October 27, 2009, 10:10 am

    McDonalds now charges $0.10 for xtra onions on a burger. That’s a few measly grated onion pieces. I asked if I get a credit for NO pickles? guess…

    &&&&&

    Now THERE’S inflation! RA

  • Rich October 26, 2009, 4:53 pm

    From an old Altair 8800 HP Silicon Valley emigre:
    GM used to employ that catchy slogan about what’s good for America. GM Brass used to joke that if their vehicles ran like Windows, they would stop every few miles for rebooting and rebuilding with patches.
    GM had too much debt. MSFT has 15% debt and did not sell out to IBM, so the rest is history. IBM sold their low-margin high customer service commodity PC business to the Chinese.
    That MSFT did not write MS Basic, but bought it, said it all.
    Google Gary Kildall for the rest of the story.
    Names and vaporware releases were more important to geeks than customer ease. Software was a hardware hog that no longer drove new hardware sales when IT budgets were cut. Thus XP diehards, even with all the clumsy patches.
    For years MSFT was a VISTA value trap with 78% margins, 36% return on equity, dividends growing at 26%, sales growing at 9% and declining earnings.
    Even Soros bought MSFT well over current 17 times earnings, 9 times tangible book, 4 times sales and sold it.
    The catch to the one trick pony was declining sales and profits in Windows.
    A lot of new MSFT products did not fly, while AAPL’s did and do.
    Then there is cloud computing, with software apps automatically upgraded, better maintained and more reliable on servers. Cloud computing made GOOG the number one hardware buyer and consumer of electricity in the world.
    That play may be over, leaving VMW from 17.25 to 60.5 PnF target.
    MSFT even attempted to become a software utility with subscriptions.
    Insiders were not fooled. The last time they bought MSFT was over a year ago. MSFT stock options languished.
    No wonder BG Bridge and Foundation partner WEB didn’t buy much high tech.
    LVLT .57 to 4.13 PnF target being an exception to prove his rule.
    MSFT was a good buy at 14.69, so far a double, with PnF target of 58.
    We use Trailing Buy and Sell Stops like Rick to enter and exit positions.
    Regards*All

  • nitram October 26, 2009, 1:39 pm

    Wait a minute! don’t get your hope up with Mcdonald’s, because they have introduced a new tax, no kidding “THE EAT IN TAX.” http://www.wivb.com/dpp/news/local/What_is_that_new_tax_at_McDonalds_20091005

  • Dusty October 26, 2009, 7:23 am

    To Bill Wilson,
    Agree with you on Microsoft, however also a word of caution. My computer geek son, who has been running Linux or XP/Linux dual boot machines (he never bothered with Vista) for the last couple of years recently put 7 on his newest box to test it out. That is now all he runs (no more Linux or XP).

    If he spent his own hard earned $100-$200 to get Windows 7, and he feels it’s worth it, then good for him. But if you bought it for him, then you’re the sucker. A lot of things look good if other people pay for it.

    Dusty

  • billwilson October 26, 2009, 3:31 am

    Agree with you on Microsoft, however also a word of caution. My computer geek son, who has been running Linux or XP/Linux dual boot machines (he never bothered with Vista) for the last couple of years recently put 7 on his newest box to test it out. That is now all he runs (no more Linux or XP).

    You know you try and raise your kids right … and then they go and surprise you. What’s a parent to do … now that he is bugging me everyday to put 7 on my machine, even with him knowing how I feel about “them”.

  • Phil C October 26, 2009, 2:18 am

    Can we seriously expect anything else from people that are smoking green shoots?

  • Peter Montgomery October 25, 2009, 9:16 pm

    Rick, as always, a biting commentary on MicroSloth, MicroSlop, MostlyCrap, whatever name fits

    For the first time ever, I’m getting a Mac

    had enough of the MicroFool’s garbage and endless promotion of the “next one is the best one ever!”

    the sad part is, you don’t even have to be sarcastic in describing the idiotry of the buffoons that run the company

  • Tahoe Billy October 25, 2009, 3:24 pm

    Rick,

    Your sense of humor rocks, though it’s hard to laugh at many of your stories due to the
    bleak nature of realities you consistently underscore. Nonetheless, a sense a humor is needed it times good and bad.

    &&&&&

    As Lily Tomlin once said, no matter how cynical you become, it’s never enough to keep up. RA


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