Microsoft (MSFT)

Microsoft currently faces strategic challenges to its core businesses from Apple and Google. Apple's share of the consumer PC market, while still significantly smaller than Microsoft's, has enjoyed significant recent growth, buoyed by the "halo effect" of the iPod on Apple PCs. Meanwhile, Google is starting to deploy free Web-based applications, such as Google Docs and Spreadsheets, that provide a useful subset of the functionality that Microsoft Office provides. If Microsoft does not successfully compete against these companies over the next few years, their Office and Windows revenues are likely to erode.

Free software is becoming easier to obtain with the spread of broadband internet. People will have less reason to buy the software, and the prices for software will go down reducing profit margins.

Linux OS is being adopted in emerging markets which will hurt growth. Earlier in April 08, Micorsoft Corp. (MSFT) announced its second "Fair Play Day" in 14 Latin American countries, where investigations led to the seizure of more than 160,000 counterfeit copies of Microsoft software. The contraband had an estimated street value of $18.2 million. This is just the latest attempt by the software giant to try to stem the rising tide of counterfeit products that costs the company millions of dollars annually in some of its most promising markets.

"The crackdowns are part of Microsoft’s global Genuine Software Initiative, which aims to help protect legitimate distributors and customers from the effects of software piracy," said Microsoft SA partner executive Mark Reynolds. Microsoft is also trying to protect its bottom line, which has been sharply undermined by the rise in piracy. For its fiscal third quarter ended March 31, Microsoft net income fell 11% to $4.39 billion, or 47 cents a share, mostly the result of a 24% drop in sales for the company’s flagship Windows software.

Microsoft’s general manager of investor relations, Colleen Healy, attributed much of the sales decline to the cottage industry that has sprouted around an upswing in the number of unlicensed PCs on the market. "Q3 was a tough quarter on the unlicensed front," Healy told CNET. "We had been making gains there for the past several quarters."

The company made special notice of it in its fiscal third-quarter earnings, released Friday: "While piracy adversely affects U.S. revenue, the impact on revenue from outside the U.S. is more significant, particularly in countries where laws are less protective of intellectual property rights. Similarly, the absence of harmonized patent laws makes it more difficult to ensure consistent respect for patent rights," the company said.

Slowing PC growth is problematic for Microsoft, whose core Client Division business driver remains pre-installation of Windows in new PCs. The rate of growth in PC shipping is expected to be around 9% in 2007, a drop of about 5% from the 14% growth rate of 2006.

GM's (General Motors) Chief Systems & Technology Officer Fred Killeen announced that their company will choose to not upgrade their system computers to the Vista operating system in anticipation of Windows 7, the multi-touch function successor of Vista, which will probably not debut until around 2010. Expect other companies to follow suit, thereby slowing down Microsoft's sales growth in the short run, at least.

Microsoft doesn't see the emergence of new markets: Internet (with Netscape), Portal (with Altavista and Yahoo!), Search Engine (Google), SEO (Google), Social networking(with MySpace)....

Microsoft is a strong vendor of "real" products. They provide state-of-the-art IT solutions but without strong young Business analysts and visionnaires, they cannot fight against small companies with brand new ideas.

I ask often to my customers, CxO working for banks why they didn't create PayPal? I answer for them that they are mammouth that earn a lot of money with direct costs and it is an excellent to do not be creative and invest where no competitor is not investing!

Microsoft's investments probably will not pay off significantly for at least a year or two. With heavy long-range funding directed towards its Online Services, Entertainment, and Business divisions, Microsoft faces a pronounced lack of pricing and acquisition leverage in the near term.

Microsoft's investments probably will not pay off significantly for at least a year or two. With heavy long-range funding directed towards its Online Services, Entertainment, and Business divisions, Microsoft faces a pronounced lack of pricing and acquisition leverage in the near term.

You might as well put your money in a CD or some type of savings account. The growth of this company is too slow and the stock barely moves. Unless the XBOX 360 is their only business, the likelihood is that the stock price will be a laggard in the stock market. STAY AWAY!