Notes on tech

Atleast that is what Barron's thinks about Microsoft. For those of you who dont have the subscription to Barron's, I'll summarize:

• On the recently announced Microsoft Vista delay, Barron's says that sofware delays are normal with large software products. To give you an idea of the size of the product we are talking about - Microsoft Vista is 50 million lines of code. Bigger than anything they have ever created.
• Vista is the most significant upgrade since Windows 95. They are also launching an extensive revision to Office around the same time, in 2007.
• According to an analyst quoted in the report, Microsoft's total revenue growth should jump from 8% in fiscal 2005 to the low double-digits in each of the next three years, with profit improving from $1.16 a share last year to $1.32 in fiscal 2006, $1.54 next year and $1.75 the following year. The analyst thinks that the stock is 25% undervalued.
  
• Ballmer says that the spending environment is very very good. Companies are making smart IT investments. He too thinks that double digit growth is possible.
• Another analyst says that Microsoft is underplaying the improvements and features in Vista to reduce the short term impact on their partners, until Vista is launched.
• Vista will drive an extra $1.5 billion in revenue for Microsoft over the product's first 18 months.
• Microsoft strategy for expanding revenue is - a) Unit growth in number of PCs. b) Piracy reduction in India and China. c) Sell premium versions of software.
• The combination of Office 2007 and new versions of some of Microsoft's server offerings provides a lot of that business-intelligence software functionality. This means that more avenues to make money.
  

Of the challenges facing Microsoft, Barron's notes that Linux, Apple and Google have all become better and stronger competitors. Suprisingly (to me atleast!) Microsoft views IBM as his company's primary rival in the corporate computing market. The way Ballmer sees it, to meet your needs, you can buy software from Microsoft, or hire consultants from IBM.

Personally, I am not sure about the Microsoft stock doing a supersonic again. I think that more and more people are buying Apple computers. Dont underestimate the word-of-mouth effect here. More and more people are getting used to doing things online. So stuff which earlier required a PC, can now be done online through a browser, thanks to faster internet and better online services. This is significant in countries like India, where not everyone owns a PC. You goto a cybercafe, get your work done online and signoff. Linux is definitely gaining ground. Competition has started sinking its teeth into Microsoft's cash cows.

Having said the above, I must also say that I recently bought some MSFT stock. Contrarian? You decide.

(unfortunately, this post coincides with April 1st - April fools day. But it is not an April fool joke. I did buy 50 shares of MSFT and Barron's has the above as its cover story)