thad05@xxxxxxxxxxxxxxxxxxxxxxxxx <thad05@xxxxxxxxxxxxxxxxxxxxxxxxx> espoused:
> Mark Kent <mark.kent@xxxxxxxxxxx> wrote:
>>
>> MS are in extremely deep trouble at the moment. Their reserves are
>> evaporating fast, which will soon begin to negatively affect their share
>> price. If they start to take on debt, in due course, their credit
>> rating will fall, which will cause the cost of their debts to rise.
>
> I doubt they will start taking on debt any time soon. It is more
> likely that they will begin slashing unprofitable divisions before
> then. Much of their recent burn rate has been from stock buybacks
> and dividends in an effort to keep share price up. Taking on debt
> has the opposite effect and will be a last resort.
I agree that it will be a last resort, but as Microsoft seem to have
been unable to do anything other than lose cash for a very very long
time, it seems inevitable that debt will be required, *unless* they have
a huge change of direction. My personal interpretation is that they are
pumping the cash into the share price so that the big shareholders can
"monetise" their holdings now.
>
>> Sooner or later, analysts will recognise that Microsoft have no
>> successful pitch into any market, and have no assets. Once their lack
>> of assets is recognised, their balance sheet collapses. It will not be
>> allowed to happen too quickly, of course, as there is a lot of money
>> invested in Microsoft which brokers and investors will not want to lose,
>> however, once the run starts, it will be difficult to stop.
>
> Never underestimate the power of an entrenched legacy install base.
> Novell mined revenue from their Netware install base for many years
> after its death was a forgone conclusion. Windows and Office are
> nowhere near that kind of decline.
I think that the change from Windows and Office will happen rather more
rapidly. Novell never had a monopoly, and therefore, never had
monopoly business practices, so have been used to surviving on normal
incomes - Microsoft do not have that cultural advantage.
>
> That is not to say MS is not facing challenges though. Linux has
> taken huge chunks of the server and embedded markets and is now
> nibbling at the desktop. Google has denied MS control of the web
> services sector, and even Office revenue is seeing some competition
> from OpenOffice. The core products are still making plenty of
> money, but the days of heady growth are certainly over.
>
I think that the desktop is very very dead indeed. The combined
assault of web tablets, mobile devices, appliances and ultra-portable
linux-based machines doesn't really leave a lot of space for Microsoft.
Don't forget that having a large installed base of XP and Office 2003
is of virtually no monetisable value once the public at large realise
that OO.org and linux are quite adequate for their needs. Firefox and
oo.org have gone a long way to achieving that, and Ubuntu, Eee, N810,
OLPC and PS3 are in the process of driving that home.
One could argue that gamers might want Windows, but there doesn't seem
to be much evidence of that. The best games now are appearing for
consoles, which are far easier to set up, use and run than PCs are;
Microsoft's console is losing them money.
By one of those exceptional twists of fate, it's probably working to
Microsoft's disadvantage that they were not broken up either by the US
or the EU, since either would probably have left them in better shape
than they are in now.
I predict that they will keep doing share buy-backs to keep the share
price inflated whilst senior people, pension funds and major investors
extract the maximum value, after which, I think that the share price will
crash, that new management will be brought in, that development will be
"offshored", and that the company will change beyond recognition.
There will not be another version of Windows, nor will there be a
version of Office. Microsoft, after their "rebuild", will be an
open-source integration house, looking to compete with IBM, DiData,
Logica, etc.
--
| Mark Kent -- mark at ellandroad dot demon dot co dot uk |
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| My (new) blog: http://www.thereisnomagic.org |
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