MSFT down yesterday and this morning as Greece concerns continue to weigh on the market. The stock has rallied over the past year with the Windows 7 release, but over the long haul, we think Microsoft is in a challenging spot, as the world moves away from PC-based computing toward cloud and mobile computing. The next major catalyst is Office 2010. MSFT currently trades at 15x 2010E P/E – inexpensive compared to historical trading multiples, but Microsoft’s rapid growth days are likely behind it.
Windows 7 Exec Ends Up At Hewlett-Packard; Impact On Microsoft Minimal (Goldman Sachs)
In January of this year long-time Microsoft executive and senior member of the team that launched Windows 7 Bill Veghte announced he’d be leaving the company to pursue a more senior role elsewhere. Yesterday we found out that Veghte landed at Hewlett-Packard as EVP for Software and Solutions. Goldman Sachs analyst Sarah Friar does not see much of an impact on Microsoft or its Windows franchise. Friar believes Windows is on “strong footing” and has tailwinds behind it driven by increased tech spending this year. The move becomes more interesting if one considers Dan Frommer’s belief that HP could be making a play for its own OS (it currently uses Windows). We think Veghte is a good candidate to drive this initiative (if it is in the works), but the hire was more about Veghte running his own division (his role was diminished before he left Microsoft).
The Kin Reviews Are In And The Consensus Is It Blows (ZDNet)
The Kin will likely be released next week and if early reviews are any indication, the launch will probably be a flop. Bottom line, we don’t think this is the answer to Microsoft’s recovery in the rapidly-growing mobile computing space.
- Gizmodo likes the phones, but is turned off by the fact that users need to pay about $100 a month to use them. These kind of plans are typically sold with smartphones, but the Kin is really just a very robust feature phone.
- ZDNet is puzzled why the phones do not have any applications installed or available in a marketplace.
- “Other reviewers are still scratching their heads as to why Microsoft felt a need to work with Sharp to create Windows Phones for a particular segment of the market, as opposed to pitching Windows Phone 7 devices to the “Upload Generation.” We’re scratching our heads too.
More Evidence Console Gaming Is Cratering; Nintendo Profit Drops On Weak Wii Sales (The Wall Street Journal)
Sales of Nintendo’s Wii dropped 21% last year, driving profit losses at the Company. In addition, management expects sales to drop another 12% this year. This is obviously bad news for Nintendo, but it also illustrates just how quickly users are migrating to online and mobile games, away from traditional console platforms. This is bad for all players in the console industry, such as Microsoft’s Xbox. Microsoft has had some success driving use of its Xbox Live platform, but we think secular trends are against them and the Xbox is in for a rough ride.
Google Redesigns Its Search Interface With More “Bing-Like” Features (Seattle PI)
Google is rolling out “search-refinement” additions to its search engine. “In addition to media type, Google searchers can sort their results by time, location and whether they’ve visited those pages. Plus, users can see related searches and refine their search by, for instance, reducing the number of shopping-related results.” This sounds a lot like Bing, which has caused some to wonder if the moves are in response to recent share gains by Microsoft’s search engine. It’s tempting to say so, but Google has been testing features like this for years and several have been available to some degree. Now the company is just making them more prominent and permanent. Bottom line, Bing’s share gains are impressive, but they are driving losses through bought traffic.
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