Microsoft Must Impress
Imagine standing in line at midnight to buy the latest release of Microsoft Windows.
For Halo 2 maybe, but these days definitely not for a new operating system. But as silly as it sounds today, thousands of tech enthusiasts flocked to computer stores nearly a decade ago to be the first to own Microsoft's much-ballyhooed Windows 95 when the clock struck midnight.
Now some analysts are comparing that mania with the upcoming release of Longhorn -- Microsoft's next flagship OS -- expected in beta form this summer, as they urge investors to buy the company's lackluster stock.
They're banking on Longhorn to propel sales much like Windows 95 did with its advances that 10 years later seem quaint -- such as the ability to run multiple programs safely. Among some of Longhorn's expected improvements: new video-game-like graphics and tighter interaction and interoperability between desktop applications and Web sites.
But it appears buy-siders are so far unconvinced, as evidenced when Microsoft shares gained a measly 7 cents a day after the company delivered what one Wall Street analyst called "bullet-proof" second-quarter results at the end of January. Much the way consumers are no longer likely to go gaga over a new operating system, most investors simply no longer get excited about Microsoft.
"I don't see Microsoft as a very sexy stock," said Jim Fisher, a portfolio manager at Univest Wealth Management & Trust, which manages nearly $900 million in assets, including Microsoft shares. Although the stock is a good "core holding," Fisher said he wouldn't put a lot of money into it and wait for a huge run-up.
Why the big difference of opinion between Microsoft bulls and bears? "I think what you've got right now in the marketplace is a disconnect between a lot of us who yearn for the good old days of tech when we had 22% growth, and we're having difficulty coming to the realization that software is cyclical," suggested Merrill Lynch analyst Jason Maynard, who has a buy rating on Microsoft. "We're not going to see those days of growth; we're penalizing Microsoft because it's a large-cap [stock] ."
Source: The Street.com