Quadruple Whammy

Gartner sees a triple whammy for global IT spending: global economy is sluggish, the Euro is in trouble and the floods in Thailand have dampened production of hard drives seriously. For M$, I see a fourth whammy: people are loving small cheap computers not running that other OS.

Gartner sees growth of spending on computing hardware cut in half compared to 2011, but in 2011, M$ was essentially down to zero growth in licences sold… Under these conditions they might actually see a decline in revenue. Hundreds of millions of smart phones and tablets are not running M$’s stuff. All the growth seems to be in that sector. I will bet M$’s financial disclosures to the SEC will be spectacular two weeks from now. They didn’t sell a lot of OS licences for smart phones nor tablets and sales of other personal computers were down over the Christmas period when a lot of retailers break even…

Not that we should shed a tear for M$. They have a lot of unearned income and money in the bank. They won’t starve. It’s just that they are losing their grip on IT. We should smile for the freedom that entails. If we run software not from M$ we can do what we want with our hardware and get the best bang for the buck from our IT spending. Suppliers had better shift to what consumers want or they will go down with M$. 2012 will be a great year for IT.

On a related matter, SJVN reports that M$ will support GNU/Linux on its Azure cloud by popular demand. Virtual server usage is running 6:1 in favour of running GNU/Linux virtual machines and Azure was losing out. If M$ wants to be “all-in” for the cloud they have to support GNU/Linux virtual machines. Perhaps M$’s lock on business servers is already feeling the heat.

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
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5 Responses to Quadruple Whammy

  1. Clarence Moon says:

    “How many of them are paid by M$?”

    None of them, Mr. Pogson. It would destroy their objectivity and they do not allow that in the business. The current list of analysts following MSFT:


    “The investor who plans to make large capital gains would eschew it.”

    I don’t think the term for that is “investor”, anyway. Rather “bettor”. More politely, “trader”. An investor, looking for a steady income with relatively low risk, might very well consider a stock that has such a huge cash reserve along with a long history of going sideways as your chart shows and paying a decent dividend to boot as a very good investment vehicle. Certainly many of the major funds with experienced managers are deeply invested in MSFT stock. I believe some two-thirds of the stock is held by institutions and, of course there is the stock held by Gates, Gate’ Trust, and Ballmer.

    What would you buy instead.

  2. Clarence Moon wrote, ” the majority of analysts are saying “Buy!””

    How many of them are paid by M$?

    Even if one rationally could recommend a purchase of MSFT shares, it’s not because the desktop OS is growing like Topsy. It’s because there is a fairly steady revenue. It’s an investment wealthy people might make in order to gain a revenue stream. The investor who plans to make large capital gains would eschew it.

    “Next Earnings Release Date: 01/19/12.
    Our rating on the stock: NEUTRAL with a score of 3/5.”

    see http://www.dojispace.com/stock-picks/microsoft-stock-price-msft.aspx

  3. Clarence Moon says:

    MSFT’s 10-Q filing is actually 3 weeks away, I think, but it is close enough to serve as a test of your prognostications, Mr. Pogson! I don’t own any of their stock myself at the moment, but the majority of analysts are saying “Buy!” right now. Of course they may be measuring with a different ruler than what you are using.

    “They didn’t sell a lot of OS licences for smart phones nor tablets”

    Nor did anyone else, I believe. Unless you manufacture a phone or a tablet, there seems to be no market at all for phone/tablet OS outside of WP7. Will it ever develop into a money machine like PC OS? With about as many phones and tablets in the world as PCs already, my guess is that the answer is “No”. For that matter, I have become somewhat interested in the dollar value of the apps being sold for phones and tablets and I cannot find any estimates for the actual size of that market either. Certainly it must be attractive with Amazon and Apple and Google all pushing their own app stores, but I haven’t found any (no charge) market survey information as to the size of it.

    We more or less know how much Microsoft and other big companies are making from their PC software products, but who, other than Angry Birds Rovio, is making much from apps? There seem to be so many freebies handed out by companies that use the app as a front door to their businesses. Other than games, though, there doesn’t seem to be the sort of economic engine there that made so many companies rich from PC software sales.

  4. Dr Loser says:

    Revenue or profits, either one, really. You can even choose, Robert?

    How can the John the Baptist of Small Thingies lose on this one?

    Let the flood of predictions commence!

  5. Dr Loser says:

    OK, Robert, I’ll buy that lay for £20. I’m not even going to ask you to reciprocate.

    And I don’t even have a clue about current M$ accounts.

    In two weeks, or whenever that was, they will announce an anaemic year of > 1.5% growth in profits. You will claim this as a victory, because obviously they are losing money. I will gently point out to you that they are doing quite well as a utility company that relies heavily on the Western World (or developed if you prefer), which has probably seen something like 0.8% growth over the period.

    But have it your way. Microsoft is on the way out.

    Do remind me when the £20 is due, won’t you? You can nominate the charity. I’ll even let you nominate the FSF, should you be so inclined.

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