After selling my SIRI stock last week, I was itching for somewhere to put that money. MSFT had been on my radar for a while and was an obvious target for me. It seems I wasn’t the only one considering investing in MSFT though, because the stock had a rally from the low $27s last Monday to just over $28 this Tuesday.
While I was pondering, a few things happened:
- Microsoft revealed their Origami handheld device.1
- Sony announced a delay in the release of their Play Station 3 gaming console.2
- Jim Cramer talked up the stock on his radio show… twice.
I thought I had missed the boat. But then this Tuesday Microsoft announced a delay of their own3. The consumer version of Windows Vista, the next installment in the Windows Operating System, will be released in January 2007 rather than the previously-planned “second half of 2006”. The “corporate version” is still planned to be released this November though.
News of the delayed release erased the previous week’s rally, taking the stock back down to the low $27s Wednesday. Is this my second chance to jump aboard the MSFT train? Is this a buying opportunity for MSFT?
Reasons I am Investing in Microsoft Today:
- The delay of the PS3 and the fact that analysts predict Sony’s gaming console could retail for as much as $500-$900 (well above the $300-$400 price point for the Xbox 360) means that more people will buy the Xbox 360 now. Gamers who were waiting for Sony’s console may give in and buy a 360 now. In addition, Microsoft will have more time to release titles and an opportunity to drop the price of the 360 before Sony comes to market with the PS3.
- When Vista is released, everyone will be forced to upgrade over the next two years. Any new computer sold after the Vista release will include the new OS. Microsoft will make a ton of money selling this product.
- A new version of Microsoft Office (Microsoft’s other cash cow) will be released later this year.
- New versions of Microsoft’s server and development tools are also in the works.
- Money is Moving to “Safe” Stocks: There has been a bit of speculation lately that institutional money will be moving into safer stocks in anticipation of a bear market. Despite numerous warning signs, our market doesn’t seem to be slowing down one bit. If true though, I can’t think of a stock with a safer reputation than Microsoft.
- Online Services Competition: Microsoft’s online services like Live are going to gain a tremendous amount of market share when Vista makes its way onto people’s computers. These services are going to be featured in or possibly integrated into the OS. Users new to online bookmarking, image searching, map search, etc. will use the Microsoft versions since the icon is right there on their desktop. Also, many experienced users will switch to Microsoft services because of the easy OS interoperability.
- OS Competition: There are rumors that Apple may build their windows manager and applications to run on top of Windows and leave the OS game altogether!4 Add to this the fact that Linux penetration on the desktop is not moving as fast as some predicted.
Risks to This Investment:
- Further product delays: this isn’t the first time Vista has been delayed (remember Longhorn?).
- Everyone is talking Xbox and PS3, but there is another player in the console business: Nintendo. And Nintendo is a BIG player. I’m much more excited about the Nintendo Revolution, which I feel has more potential than the Xbox 360 and PS3 combined.
- Office Share: Many schools are at least considering moving away from MS Office to open source alternatives. In addition, the $100 laptop (which brought me to purchase some AMD shares a while ago) has the potential to break the cycle of life that has sustained Office for so long: kids learn Office in school and then demand Office at work.
 Microsoft’s Plans For Handheld Game Player And “iPod Killer” by Dean Takahashi.
 Playstation 3 Release Delayed by May Wong.
 Vista Delay Good for Pundits by Marc Perton @ engadget.
 Will Apple Adopt Windows by John C. Dvorak.