Vista’s Debut: So-so

In comments today we discussed how the launch of Microsoft (MSFT)'s Vista operating system was a "sell on the news" sort of event.

We already have our close calls off the table but we still have two longer plays and I came very close to closing out our April position on today’s dip but we already called a top there and sold the $30s for .95 against them, a call that, unfortunately for MSFT, seems to be on the money.

As with Apple’s iPhone announcement and, it seems, as with anything popular, there are always critics anxious to take it down. Today it seems that it was time to complain about the fact that Vista doesn’t run certain downloadable games because they look like "malware," a form of virus to which Vista’s beefed-up security just says no.

There was a noticeable lack of lines at the stores for the "Vista Release" as it turns out that most serious people who want it either got the beta months ago or simply downloaded it rather than sit outside Best Buy in freezing weather waiting for the store to open. From the coverage given by the press, you would think Microsoft had remade Ishtar in 3-D!

We know Vista is already under attack in the EU, a rehash of that same old anti-trust suit that was such a yawner in 2003, 2004, 2005 and 2006. IBM (IBM), Nokia (NOK), Sun Microsystems (SUNW), Adobe (ADBE), Oracle (ORCL), Corel (CREL), RealNetworks (RNWK), Linspire, Opera (OPERA) and Red Hat (RHT) are all getting along on this issue - something needs to be done about Microsoft!

"Vista is the first step of Microsoft’s strategy to extend its market dominance to the Internet," the ECIS statement said. It said Microsoft’s XAML markup language was "positioned to replace HTML," the industry standard for publishing documents on the Internet. XAML would be dependent on Windows, and discriminatory against systems such as Linux, the group said.

"The end result will be the continued absence of any real consumer choice, years of waiting for Microsoft to improve—or even debug—its monopoly products and of course high prices," said Thomas Vinje, lawyer for ECIS, in the statement.

I can’t say I really disagree with them. While it’s good to have a "universal operating system," it is not good for it to ruthlessly crush competition and stomp out innovation. Speaking of innovation - check out this totally cool Linux desktop! No wonder Microsoft is concerned…

MSFT hasn’t seen $30 since the 11th and has pretty much stayed over $29 since Halloween but they were at $22 in June and haven’t actually had a pullback since. On the other hand, they’ve been trying to break (back) over $30 for 5 years and I’m not sure how long the annual P/E compression can be sustained by a company that puts up another $4Bn in revenues each year [with all of today’s fuss, SanDisk Corp. (SNDK) is on pace for $2Bn for the year].

Microsoft is on pace to hit a solid $50bn this year and add another $6Bn in 2008 (Google earned $6Bn all of last year). Profits should be around $15Bn by then and there’s still the little matter of what to do with the $40Bn in cash they have laying around (more than XOM). Bill Gates hangs with Warren Buffet so I’m sure he has some ideas for what to do with the money, and he still owns 900M shares of MSFT stock so his net worth is up about $8Bn since June - pretty good second half returns!