Microsoft Takes A Mulligan, No One Notices Or Cares

| About: Microsoft Corporation (MSFT)

It's being reported today that Microsoft (NASDAQ:MSFT) is soon going to be reversing course on its Windows 8 operating system, bringing to a close what was supposed to be a "do-or-die" launch for the company as a whole.

CNBC reported:

"Key aspects" of how the software is used will be changed when Microsoft releases an updated version of the operating system this year, Tammy Reller, head of marketing and finance for the Windows business, said in an interview with the Financial Times. Referring to difficulties many users have had with mastering the software, she added: "The learning curve is definitely real."

Analysts warned that changing course would be a significant admission of failure for Steve Ballmer, chief executive, who called the October launch of Windows 8 a "bet-the-company" moment as Microsoft sought to respond to the success of Apple's iPad.

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As a tech-savvy person who uses Windows 7 instead of Windows 8 on my home computer, I'm more than interested in seeing exactly what changes Microsoft plans on making to Windows 8; which was supposed to be the operating system that made things simpler and more tablet based for users.

From the same article:

Microsoft has also admitted to a range of other slips with the launch of Windows 8, including failing to do enough to train retail staff and educate potential customers about the new software, as well as not focusing all of its financial incentives behind the touchscreen PCs that show off Windows 8 to best advantage. "It's very clear we could and should have done more," Ms Reller said.

You don't have to be a totally tech-involved person to understand exactly what happened here; it's been the same thing happening to Microsoft since the launch of the original Windows.

  1. Apple (NASDAQ:AAPL) pioneers something with superlative hardware and software (iPhone, iPad, original Mac, Apple retail store, iTunes store)
  2. Microsoft rushes to copy it and get it out first, trying to get business by being first to market. (Windows Phone, Windows 8, original Windows, Microsoft store, Zune store).
  3. Microsoft's quality of the product suffers immensely.
  4. Microsoft issues a ton of patches and changes.
  5. Apple people keep using Apple, Microsoft people keep using Microsoft.

So, it's kind of tough to say I'm even surprised to see this, to be honest. Regardless, this has become somewhat of standard operating procedure for Microsoft, and I'm not sure it's going to affect the stock much, if at all.

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Although it's correcting about 2% as I type this, Microsoft's stock has had a great April, tacking on almost 20% to its share price since the beginning of the month.

Microsoft is a company that has a mentality of screw-ups dating back as far as this investor can remember. Rather than hurl insults and bash the stock, people that are long MSFT almost find it morbidly endearing at this point. The Windows 8 problem will work itself out, nary a person the world over will notice it, and Microsoft will go on to creating the next "do-or-die" operating system that will take them 5 years and will need to be patched to death after its release.

Aside from PCs, how does Microsoft continue to innovate and grow its company and (more importantly) its stock price? Well, you have the Windows Phone and then my personal favorite, the Xbox.

SA contributor Tom Luongo does a great job pointing out Windows Phone's recent growth, which he found surprising:

On the other hand, Microsoft has been able to buy its way into contention, but only, in my opinion, because Nokia did such a good job on its Lumia handsets. It is one thing to see sales share growth rise significantly one month. Two months, however, with an acceleration of the growth is certainly worth not only noting but celebrating if you are a Microsoft shareholder.

Say what you want about the numbers, but 5.6% of sales in the U.S. where one of the major carriers, Sprint (NYSE:S) and all of its pay-ads-you-go MVNOs, does not have Windows Phone 8 devices yet is very impressive. More impressive than I expected and I am quite bullish on Windows Phone.

Also, it's worth noting that Microsoft does have one area of business where they have a massive leg up on Apple, and that's gaming. I'm extremely bullish on Microsoft because I'm extremely bullish on Xbox. Xbox continue to be the predominant system for most gamers, and it's the one area where Microsoft is actually both ahead of the curve, and semi-spearheading.

It has been announced on May 21st of this year that Microsoft will be unveiling its next generation Xbox system:

Microsoft is hosting an event May 21 that all but guarantees to show off the Xbox 720, as gleaned by an event invite sent out by the company today.

"A new generation revealed," the invitation, glittered with "Xbox," reads.

Don Mattrick, president of interactive entertainment business, and the Xbox team are hosting the "special unveiling," set to take place in Redmond, Wash. While there's no known name for the new console yet, most have tagged it as the Xbox 720 or Durango.

May 21 marks the beginning of a new generation of games, TV and entertainment, a Microsoft representative said in an email to TechRadar. The event will give a taste of the future while also letting Microsoft share its vision for the gaming console, the rep added.

With a launch comes a brand new stream of revenues, as people upgrade their gaming consoles. Also with the launch comes plenty of media and press surrounding the event, which is going to put MSFT stock on the front page of the tech report for lots of retail inevstors. It's going to be a bullish event, and I'd want to be in well beforehand.


Due to what I think is going to be a massive launch of Xbox 720 and corresponding media, combine with some growth shown with the Windows phone, I can't say I'm anything but bullish on Microsoft still. I contend this run-up still has room to go and that the Windows 8 retraction is to me (and to the market) looking like a complete non-event.

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Ahead of what I think is going to be a massive launch, MSFT stock looks the strongest that it has in years from a technical standpoint. With an extremely bullish 50 DMA cross of the 200 DMA, I'm sure MSFT has pinged across the screens of many traders looking to take advantage of the upward momentum.

I'm bullish on MSFT here, and wish the best to all investors, as always.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MSFT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.