It's Too Zune For A Requiem

Jun.19.12 | About: Microsoft Corporation (MSFT)

At first, all of the talk was about how money invested in Microsoft (NASDAQ:MSFT) was "dead." Although I don't currently own shares, I've long thought of Microsoft as being an annuity based on the predictable dividend and option premiums when using a covered call strategy. I've also recommended it as a cornerstone of both a retirement investing strategy and a low maintenance, income producing strategy.

Of course, as Microsoft started moving toward $30 a few months ago, the ubiquitous "Talking Heads" started to wake up and fully embraced Microsoft in a manner that was uncomfortable when viewed in public.

While Microsoft was becoming less and less of a laughing stock, there was still plenty of energy remaining to begin speculation regarding the heights of Apple's (NASDAQ:AAPL) share movement. The questions were simply when Apple would reach $1,000 share price and just how high it could go.

Of course, as it always happens, once something is on absolutely everyone's radar screen, then appears on the national news and non-technology magazine covers, the predictable becomes illusory. When the obvious didn't occur there were some murmurings that perhaps Apple was doing nothing other than running in place, as it uncharacteristically started lagging behind the overall market once it reached its most recent high point, nearly 3 months ago.

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And so as all of the talk centered around how Apple had suddenly and significantly reversed its upward stock price march the "Talking Heads" were beginning to swoop down on the carrion. Include me in that category, as I have previously stated my belief that Apple has hit a wall. From my perspective, as a short term trader and one selling covered calls, Apple has again become an appealing purchase.

Clearly, when it comes to Microsoft and Apple, the lines were drawn a long, long time ago. Suggesting, however, that Apple's stock has hit resistance isn't a comment on the quality of the products, but somehow, those two are often correlated in people's minds.

Making a great product that everyone wants doesn't make it immune from competition, though.

As someone once told me, "business is business and friendship is friendship." He never finished the statement, but I think I know what he had meant as he proceeded to pursue a very unfriendly path in a business dealing that we had been navigating.

The lines may be figurative ones for certain, but there are also the literal lines drawn by the technicians with well coiffed hair and highly tailored suits.

Then there was ominous talk about the meaning of Apple's decreasing stock price in the face of rising volume.

All scary concepts.

To me, no one will every be able to explain in purely technical or fundamental terms how a stock price can so abruptly change direction in the absence of news. For the die-hard technicians, there will certainly be someone to point out some line crossed or not crossed and use that as an explanation for Apple's reversal.

Was some decree passed that I missed? Can people no longer listen to music or talk on cell phones?

50 Day Moving Averages. 200 Day Moving Averages. There is no shortage of examples to demonstrate points that are screaming to be made.

TooZune for a Requiem

To those, I ask if they've ever heard of the concepts of "sensitivity' or "specificity?" How about "false positives and false negatives?" Have they never heard of "The Zune?"

A couple of generations ago a deservedly disrespected past President spoke of the "silent majority." I think that in the world of stock charts the silent majority are those that don't behave quite as predictably as a technician would have anyone bothering to listen, believe.

No one is ever going to show you the charts where the stock prices didn't move as the technicals predicted that they should.

What was especially amusing was the chorus commenting that the strong showing by Microsoft in the market today was coming at the expense of Apple shares as Microsoft unveiled its latest venture into the world of hardware, with the "Microsoft Surface."

A tablet without any evidence of its newest partner, Barnes and Noble (NYSE:BKS) and its "Nook'" and also a product that seems to be more of a slap in the face of its hardware partners DELL (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ). WIth the anticipated release of Windows 8, which is reportedly an operating system that belatedly recognizes the rise of the tablet form, it seems as if Microsoft has decided that its hardware partners just weren't up to the task of taking on the iPad.

Remember, business is business and there was probably never even a pretense of friendship.

The calls for Apple to reach $1,000 and beyond hearkened back to a simpler time or perhaps 4 years ago, when all you had to do was substitute "Google" (NASDAQ:GOOG) for Apple.

Google became a slap in the face to just about every analyst and Talking Head and was so long before the overall market plunged in 2008.

Now on the one hand, I'm an idiot and have no credentials. I can say whatever I want, regardless of how poorly conceived the thought is or how lacking in basis the idea may be.

That's not likely to change.

It doesn't appear as those flouting their credibility have terribly much concern for the soundness of their opinions, either. Maybe it's just a need to fill airtime. Maybe it's their belief that people are more likely to remember the tape measure home runs than the strike outs, but you'd have to be really hard pressed to put much stock, literally or figuratively, in anything you hear.

And that includes all of those that have already passed judgment on the Surface tablet. Until Walt Mossberg speaks, no one else really matters. Once he's put in his opinion, then it's up to consumers.

And so, once upon a time Microsoft was written off as being dead. Everyone agreed that it was dead money, but more critically, it was dead in its ability to innovate and lead the marketplace. There has never been a shortage of those pointing to the high profile failures in both hardware and software.

The laughing stock of the investing world, everyone pointed to its well known consumer flops. There certainly were no shortage of those from among which to choose.

You probably don't even remember the Microsoft Kin mobile phone. That was probably the fastest product to be removed from the market when measured against its hype.

The Zune you know.

Even its name is somewhat amusing. The Zune has become synonymous with large corporate failure, making it a generation's version of the Edsel. Fast forward 50 years and Ford (NYSE:F) was still kicking, outliving some of its competitors and alone in not taking a federal bailout.

With its long list of failures you almost have to wonder why Microsoft even keeps bothering to continue banging its head against the wall constructed by Apple and its more nimble competitors, unless of course it sees the wall that Apple seems to be hitting.

Some people may actually remember a company called "Kodak" (EKDKQ.PK). They stopped trying. You can never accuse Microsoft of falling into the category.

On a day that Microsoft is advancing nearly 4% and on a day that Apple is again floundering, albeit after a nice gain yesterday (June 18, 2012), the comments are pouring in regarding Microsoft's new offering.

Not surprisingly, there hasn't been anything terribly positive. Certainly, no one has ventured an opinion that it was an "iPad Killer," although there was a brave comment or two suggesting that the Surface may become an enterprise selection for those IT managers ensconced in the Windows OS.

In the meantime, Kodak has had its name removed from the theater that for years hosted the "Oscars" under the Kodak banner. That's what happens when you just stop trying. Kodak provides a prime example of how a corporate act of omission is far worse than an act of commission.

It's been nearly 100 years since Robert Frost published his poem "The Road Not Taken." However one chooses to interpret the words and sounds, there's liability in not moving forward. Kodak invented digital photography and chose not to see the road for what it was worth.

They did nothing. They believed that nothing would develop and by their act of omission they gave a great gift to those less innovative, but unashamed to make use of the "garbage" tossed out.

As innovative as Kodak may have been, it just didn't have the vision. Its own lens was clouded by the path that it was already on. Kodak failed by doing nothing and they may or may not live to see another day.

If George Eastman were still alive he would finally have a reasonable excuse for committing suicide.

On the other hand, there's the Federal Express (NYSE:FDX) experience.

25 years ago it sunk lots of money into a new technology that was going to change the world of next day document delivery services.

Without belaboring the story, what they didn't realize that "Zap Mail," the service that would deliver documents within two hours of their receipt at a central office, would be faced with the advent of consumer facsimile machines.

In today's dollars, the Federal Express flub would rank with the best of them, yet FedEx is going strong.

Besides me, how many people dwell on that failure?

Apple had its Newton. Even the Lisa, at least on a commercial basis has to be considered an incredible failure, although it clearly set the seeds for the Macintosh and so much more.

And so it is with Microsoft. It's not terribly likely that they've thrown anything out and they certainly don't give it away. Every commercial failure has some components that sooner or later are going to create consumer excitement and even more cash flow, as they are laughing all the way to the bank.

For those ready to write a "Requiem for Apple," don't waste your time, it was already written in 1984 by John Dvorak, when it debuted the mouse. Instead, just re-use the requiem already written for Microsoft.

Why re-invent the wheel on the mouse that was invented by someone else and then co-opted by Apple? Who says that you have to be original to change the world?

So if you're ready to sing dirges over the new Surface, "Too Zune, too Zune."

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I may initiate a position in Microsoft, Google and/or Apple