Novice Investing - Trouble Brewing At Microsoft ?

Date: Monday 01st 2008f December 2008 05:02:23 PM

Trouble Brewing At Microsoft ? - 06/19/2006

By: Novice Investing Staff

Speculation abounds whenever an important individual makes radical move. This article is about us speculating. Late last week, the co-founder of Microsoft Corp. (MSFT), Bill Gates, announced to the world that he is retiring from the day to day job at Microsoft. Some analysts speculate that this is a good move, others say it isn't. While we do not know whether it is a brilliant move or not, it sure points to the downfall of Microsoft

No, it is not because Microsoft badly need to fill in Bill Gates' shoes. Bill Gates sure is a visionary leader, all right. But that is not it. Day to day operation has been managed by Gates' close friend, Steve Ballmer as a CEO. But rather, the timing of his departure should alert investors about potential Microsoft downfall.

What mess has Bill Gates left unsolved? Well, this mess is not caused by Bill Gates single-handedly. However, Gates left several unsolved problems that may threaten Microsoft's dominant existence.

Search Engine. Microsoft is always late to the game and this time, search engine is no different. Its MSN search division currently trails Google and Yahoo! in terms of market share. Will it be able to catch those competitors post Gate era? We highly doubt it. First, several Microsoft executives had been known publicly to declare that MSN will create better search than Google in the next six months. Several years had passed and still, most internet users prefer Google. Some Microsoft supporters will point out to the release of MSN Ad Center to compete against Google Adsense in online advertising arena. Our advise is don't bother. As long as Google does a better job in search, it will have a better way of monetizing search than Microsoft. So, first of all, fix up your search technology! This prompts a lot of speculation. Did Gates call it quit because of its inability to create better search engine? Hey, this speculation has some valid points.

Window Vista. Well, once upon a time, it was not called Vista. Longhorn was what it used to be. Slated to be released on 2004, it was delayed for the release date twelve months later. Early this year, Microsoft announced that Vista will be delayed once again. Further, Symantec recently sued the

company for violating the agreement and threatened to block the distribution of Vista. Now, Gates is leaving this issue unresolved. Our guess? Vista will be delayed further than most people think. Perhaps, it will be released on late 2007, which is 6 full years since the release of window XP.

X-Box. Sure, X-box is famous now. It is the second largest console behind Sony Play Station. X-box live holds some potential too. The problem? It is losing more and more money for each console sold. If the number two console makers cannot make money, then who else would? Sadly, Microsoft has mostly fail to make any money on things outside its flagship window and Microsoft Office Suite.

Microsoft Office. You think this division has no problem, don't you? Perhaps, the company has not acknowledged it as a problem but we do. First, Google partnered with Sun Microsystems to provide Star Office from the internet. And then recently, Google has released the beta version of its own spreadsheet program. As internet cost decreases, companies are offering more and more web based products on the internet. Microsoft has responded to this trend by its own Window LIVE offerings. However, going forward, we believe that Microsoft Office might have to be content with lower profit margin.

As we have said, the timing of Bill Gates' retirement is impeccable. If you think that the future of Microsoft is fine, that is ok. We believe that the timing of the retirement has something to do with some of the above problems.

END

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Microsoft Corp. or any other securities.

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