Dell (NASDAQ: DELL) seems to be positioning itself as the de facto corporate champion of saving XP and saving its customers from Microsoft's (NASDAQ: MSFT) much-maligned Vista operating system. Dell announced it would charge $20 to $50 extra to some customers to "downgrade" to Windows XP. Dell even puts the "downgrade" in quotes, the idea is so ridiculous. In reality the fee is more like $100-150 because many customers will have to upgrade their version of Vista to downgrade to XP.
On the surface, this extra charge may sound like bad news, that getting XP is going to be even more difficult. But I see this as a way for Dell to ensure there is still some legitimate way to keep getting XP even after June 30, when Microsoft wants to kill it off.
There's been much speculation about whether Microsoft would relent and postpone the demise of XP another time. I also take this news to mean that it will not. Time's up. In some ways the deadline was just moved up to June 18--that's when Dell stopped pre-installing XP.
A recent study by Evans Data Corporation shows that developers don't like Vista any more than the rest of us. Six times as many are clinging to XP than switching to Vista. Only 8% of developers are working on programs to run on Vista, compared with 50% who are writing for Windows XP. That's not good news for Microsoft (NASDAQ: MSFT), who hopes that its customers will grudgingly tolerate the withdrawal of XP on June 30.
Many are begging Microsoft to relent, especially InfoWorld. The developers do plan on doing more work for the troubled operating system next year, but still not as many as are hanging onto XP. Next year, 24% of developers expect to target Vista while 29% will still work with XP.
Evans data doesn't say how much the Vista disaster has helped Linux and Apple (NASDAQ: AAPL), but it's clear Vista has sent many fleeing. eWeek reported last week that Apple now has a 14% market share -- nearly four times what it had in 2005. Using data from NPD Group, eWeek points out that Apple sells two out of three computers in the $1,000 and above category. That's largely because Macs are still way, way more expensive than PCs. If Apple ever got around to offering a computer at a price the masses were willing to pay, Microsoft might be in trouble. Microsoft may not hear the complaints about its operating system, but it understands that people want to pay less for computers.
We've known for a long time that Vista has been aggravating Microsoft (NASDAQ: MSFT) customers, both personal and corporate. More than 200,000 aggrieved customers have signed InfoWorld's Save XP petition to keep selling the old operating system past its current deadline of June 30. BusinessWeek reports today that Wall Street is increasingly concerned that Vista may even hurt Microsoft's bottom line.
It would take an issue of monumental proportions to move a behemoth like Microsoft. Could Vista be that bad? BusinessWeek's Aaron Ricadela cites a Sanford Bernstein report by Charles Di Bona estimating that Vista will clip Microsoft earnings by $395 million or 2 cents a share for FY2009. That's a lot of money, but Microsoft has earnings of over $14 billion.
The issue is that businesses are becoming wary of all the problems they've heard about (memory hogging, incompatibility with software and hardware, pestering prompts, propensity for crashes). So they're increasingly deciding to stick it out and wait for the next operating system, Vista 7, which won't be out until 2010 or 2011 (and then, like Vista, may take time to work out the kinks). Bernstein did a survey and found that only about a quarter of IT pros expect to be using Vista by 2011, down from about two-thirds a year ago.
There is nothing wrong with borrowing other people's ideas, especially if they are good ones. Microsoft (NASDAQ: MSFT) is showing off new features of the future version of Windows. One of the most significant advances is that the software will work with touch-screen technology. That would make it a lot like the Apple (NASDAQ: AAPL) iPhone.
According toThe Wall Street Journal, "A key feature of the technology allows for multiple touches simultaneously; for instance, dragging five fingers across a screen would draw five separate lines." Nifty. Whether it has practical applications is still hard to tell.
One of the byproducts of the Microsoft's feature is that use of a keyboard will become less necessary. Whether PC users will be able to type on a touch-screen remains to be seen.
Critics may argue that Microsoft wants to distance itself from its latest versions of Windows, Vista, which has received a great deal of criticism. The other possibility is that Microsoft simply wants to build software that works better. Fancy that.
Douglas A. McIntyre is an editor at 247wallst.com. and author of the Ten Stocks Under $10 letter.
Because a long, holiday weekend can be a great time to pause and reflect -- to take a step back and look at the bigger picture -- here are some highlights from BloggingStocks a year ago today: May 25, 2007.
After hitting a one-year high of $37.50 in November, the stock hit a one-year low of $26.87 in March. MSFT opened this morning at $30.19. So far today the stock has hit a low of $30.12 and a high of $30.60. As of 12:45, MSFT is trading at $30.43, up 43cents (1.4%). The chart for MSFT looks neutral but improving, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $27 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.1% return in just four weeks as long as MSFT is above $27 at May expiration. Microsoft would have to fall by more than 11% before we would start to lose money. Learn more about this type of trade here.
MSFT hasn't been below $27 by more than a few cents in the past year and has shown support around $29 recently. This trade could be risky if the company's earnings (due out on Thursday) disappoint, but even if that happens, this position could be protected by the support the stock might find around $28, where it bounced twice in the past month. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent owns and controls bullish hedged positions in MSFT.
Microsoft (NASDAQ: MSFT) says it will sell its older OS Windows XP for another two years. The company announced that "the extension is designed only for ultra-inexpensive desktop and laptop PCs too limited to run the Windows Vista system," according toThe Wall Street Journal. XP was supposed to go away because it is old.
The explanation sounds bogus. Microsoft's new OS Vista has had reasonable sales, but reviews of the software say that it is full of bugs and does not help PCs work well with other devices like printers. Apple (NASDAQ: AAPL) has been pushing its OS not just for Macs but directly into the PC market. The company claims that its product works better than Vista and it appears that some consumers are buying into that claim.
There have also been reports that some corporations do not want to upgrade to Vista and will keep the old Microsoft OS running until a version after Vista is produced.
The Microsoft move may have a silver lining. Customers and businesses that want the latest and most powerful Microsoft product can buy Vista. Those who are concerned about the software can use XP, instead of considering the Apple alternative.
Douglas A. McIntyre is an editor at 247wallst.com.
Two pieces of news have come out of Microsoft (NASDAQ: MSFT) in the last day. One is that the software company will cut the retail price of Vista. The other is that Microsoft knew that the specs for the new operating system encouraged users with slow machines to buy the software. Redmond was aware that Vista would not run well on low-end machines.
The price cut may be a sign of weakness. Microsoft says Vista has sold well, but many people have stayed with older versions of Windows to save money and because Vista has received mixed reviews. Performance problems on inexpensive machines has probably not helped matters.
The cuts are for consumer versions of the software. According to The Wall Street Journal, "The changes are seen as a response to the falling prices of new PCs, which made the software price seem disproportionately large in comparison to that of a new system with Vista installed."
That reasoning seems a bit thin. Reaction to the OS has been lukewarm. Apple's (NASDAQ: AAPL) new operating system has received better reviews and that may be helping the Mac take market share from PCs. PC companies may well have pressured Microsoft to drop prices.
A weak product is not something that a flagging PC industry needs.
Douglas A. McIntyre is an editor at 247wallst.com.
I've been using Vista and don't like it. But it doesn't really matter. Basically, as seen with yesterday's earnings announcement, Microsoft (NASDAQ: MSFT) is running on all cylinders.
Revenues spiked 30% to $16.37 billion and net income zoomed 79% to $4.71 billion, or $0.50 per share. And yes, a big boost came from plentiful sales of the Windows Vista operating system.
What's more, it looks like the good times will continue. Full-year guidance is for earnings of $1.85-1.88 per share, which is up from the prior forecast of $1.78-1.81.
Then again, Microsoft has a broad global footprint, with more than 60% of sales coming from foreign markets. In fact, the company is getting lots of traction from developing economies as has been the case for other biggies, such as Nokia and IBM.
Other positives: the Xbox is showing operating profits; the SharePoint collaboration tool is selling like gangbusters; and the aQuantive deal is providing some momentum in the online ad segment.
Microsoft is also making inroads in combating piracy. With more sales coming from foreign markets, this could certainly make a big difference over the long haul.
Lenovo, the Chinese PC company, is known for producing good laptops for businesses. But with Mac sales moving up sharply, going after Apple (NASDAQ: AAPL) seems too hard to resist.
According toThe Wall Street Journal, "As with many of its competitors, Lenovo is emphasizing design and style, and trying to turn notebooks into fashion accessories that reflect individual personality." Dell (NASDAQ: DELL) and HP (NYSE: HPQ) are also coming out with fancy, feature-full PCs.
The problem, of course, is that the field for Mac-like computers will become crowded very quickly. That leads to the question of whether the PCs will be able to get some market share from the Mac or actually just compete with one another.
The success of the new computers will depend on several things. One is whether consumers are willing to use Microsoft (NASDAQ: MSFT) Vista over the Apple OS, which has gotten very good reviews. Another is whether the new PCs can match most of the attractive design features of the Mac.
But the most important factor may be price. If PC manufacturers can bring most of the Mac's features to market for several hundred dollars less per machine, then they have a chance.
Douglas A. McIntyre is an editor at 247wallst.com.
Shares sold short in Microsoft (NASDAQ: MSFT) rose 7.6 million to 108.9 million between October 31 and November 15, according to figures from Nasdaq. The stock price of the world's largest software company moved up over 35% from Labor Day to late October, but have sold off since then. At $33, though, shares are still up 10% for the year.
Microsoft's last earnings report was especially good. It made money in every division except its online operations. Sales of its Windows OS, including Vista, moved up sharply as did revenue for its Office product line. The company's devices division, which includes sales of the Xbox 360, made money for the first time.
When the company announced earnings, it appeared that Vista sales were catching on. Global PC growth has also been robust, another indicator that Vista adoption should be strong.
More recently, however, word has begun to hit the market that many businesses may not upgrade to Vista at all. They will stay with Windows XP and wait for the next version of the operating system, which will probably be out in 2009. Any large delay or drop in Vista sales would hurt the Microsoft bottom line.
Apple Inc (NASDAQ: AAPL) has also been aggressively marketing its Mac OS as a Vista alternative. Mac sales are rising at a better rate than most PCs and this may be a sign that some operating system market share is moving to the Apple platform.
Reasons to get out of Microsoft's stock? Maybe.
Douglas A. McIntyre is an editor at 247wallst.com.
Imagine a product that many people do not think works well but sells millions of copies. Well, that's Microsoft (NASDAQ: MSFT)'s operating system, Windows Vista.
According to the FT, both business and personal computer users have tried to stick with older versions of the Microsoft OS, Windows XP, but adoption is still good enough to drive outstanding earnings for the world's largest software company. As the newspaper says: "None of this, however, has had any discernible impact on Microsoft's financial fortunes. Many companies buy their software from Microsoft under an arrangement called Software Assurance, which lets them upgrade to new software whenever they like in return for a fixed annual payment."
Perhaps that is what having a monopoly is all about. Even if products are not perfect, they are adopted. Even if companies normally would not make an investment, they are on an "automatic upgrade" program.
It might be nice to think that Linux or Apple's (NASDAQ: AAPL) new OS, Leopard, would get wider adoption, but based on most figures, the Mac has no more than 5% of the global PC market and no open-source desktop program has significant market penetration.
It's good to be king.
Douglas A. McIntyre is an editor at 247wallst.com.
Walter S. Mossberg, who writes the Wall Street Journal's "Personal Technology" column, reviewed Apple's (NASDAQ: AAPL) new Leopard operating system, and said it was "better and faster than [Windows] Vista".
Eli Lilly (NYSE: LLY) is halting two small studies of the most promising drug in its pipeline, prasugrel, which it hopes will bring over $1B a year in sales for the drug maker, reported the Wall Street Journal (subscription required).
The Wall Street Journal reported that Microsoft Corporation (NASDAQ: MSFT) has beaten Google (NASDAQ: GOOG) in a closely watched contest, winning a minority stake in Facebook for $240M, and the right to sell advertising on the Facebook site outside the U.S..
JPMorgan Chase (NYSE: JPM) is considering acquiring a stake in a Chinese brokerage as part of its expansion strategy in the country, said Gaby Abdelnour, chairman and CEO of JPMorgan Asia Pacific, reported the Financial Times (subscription required).
The Financial Times reported that Nintendo (OTC: NTDOY) raised its earnings outlook and announced that its 1H07 profits had tripled, thanks to the success of its Wii video game console and the DS, its handheld games player.
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