Microsoft's Windows Is a Glacier That Won't Melt Fast

Boy, this Windows collapsing under its own weight argument has some legs.

A few points about this Gartner presentation two days ago, which has raised quite a ruckus on Techmeme. The analysts argued Wednesday morning that Windows was collapsing under its own weight because the code is too bulky. Microsoft (MSFT) has to support all of these legacy applications. The fix was to become more modular, which is something Microsoft has already acknowledged. Vista has its problems, but as Mary Jo Foley adds: Reports of Windows'' demise are greatly exaggerated.

A few key points:

• Michael Arrington tells us that Microsoft must complete the Yahoo deal to remain relevant as Windows collapses. Let’s ponder this: Ok, I’m done. The argument makes no sense to me. So business hasn’t been so hot for Vista. Is the fix really to buy Yahoo (YHOO)? Does Yahoo make Microsoft relevant? Arrington notes that Microsoft is nothing without its consumer and business desktop software profits. That’s like saying Boeing (BA) is nothing without its airplane manufacturing business. Yahoo would keep Microsoft relevant in the medium term, Arrington argues. What does Yahoo have to do with Windows – a completely separate, not to mention infinitely more profitable, business? Microsoft’s potential purchase of Yahoo is about distributing advertising and search via the software giant’s platform. Force feed Microsoft’s search and AdCenter (or any platform) via Yahoo’s properties and poof! you have market share.
• Windows won’t collapse overnight. Folks have been saying Windows is toast for 10 years at least. The browser is the OS is the common refrain. If you say so. The reality is that this alleged collapse will take years, perhaps decades. I made this point in my initial post, but somehow collapsing under its own weight turned into collapsing tomorrow. Windows is a glacier and glaciers don’t melt in a day.
• The Vista initial corporate uptake – or lack of it – may not all that meaningful. I had a conversation yesterday with an IT exec at a massive company – the most stable household name you can think of. Guess what this company is doing? Upgrading to XP. Yes, folks, upgrading. The company has this thing for maintaining one OS instance for its hundreds of thousands employees. The time has come to move from Windows 2000 to XP. Vista? Puhleeze. But guess what? What Windows version this company uses is irrelevant – it’s still paying its licensing fees.
• Gartner is often wrong. Another theme that’s prevalent in the talkbacks to my previous post is that Gartner can be a bit off with its predictions. The prediction game is fraught with risk. Remember Apple (AAPL)? It was toast just a few years ago. That prediction is just comical now. Windows 13 years ago was going to fall to Netscape and yet we’re still bickering about Microsoft’s OS.

Comments

[Seriously ?]

why can't it melt just as quickly as it froze ?

[CH]

Yes, the melt may be slow, meaning a long, slow death for MS shareholders. But that fact is that every convert that goes from MS to Apple is a much larger % gain than it is a % loss for MS. Meaning that while MS shareholders are in for a protracted decline, Apple shareholders are poised for immediate growth

[BlahBlah]

Being an IT Systems guy for 15 years, we see no problem sticking with XP for many more years till a compelling upgrade comes along.

I'm far more excited about Server 2008, Exchange 2007 and SQL 2008. Unlike the desktop, the server code bases continue to streamline and improve(the latest stuff is the best I've ever seen).

If only the workstation group followed the cue from the server group...

[Marcel McSweeney]

another well rounded article. I'm use to reading a bias that takes away from the author's message, i didn't read one here. Thank You.

[Marcel McSweeney]

"Apple shareholders are poised for immediate growth" - sorry charlie, this optimism is already priced into the stock. good try though; a beginner might have bought it.

[deasys]

Not hardly, Marcel. The stock is pitifully underpriced. Perhaps you were thinking of RIMM?

[algoa456]

Thanks for the sensible article - what the Gartner hysteria fails to mention is that whether you like it or not there is scant alternative to WIndows.

The many flavors of Linux despite the best efforts of the open source community are still difficult to install and use. One area in particular where Windows outshines Linux is in WiFi connectivity. In this area Linux sucks. The open source hobbyists simply cannot seem to get wireless connectivity right.

Of course the Apple's operating system is great and of course it is more stylish than a WIndows computer and I would love to change over, but the trading programs and tools I use are exclusively Windows based. And that issue is in every domain. People use Windows not because of WIndows, but because of the range of WIndows applications. It is trendy to knock MSFT.

Then MSFT come out and beat the street.

Ho hum, I guess the highly paid Gartner analysts create he frisson of excitement to earn their highly paid keep.

[ValueInvestor]

deasys,

Apple has a P/E of 32 and a forward P/E of 30. Looks like its priced in to me. Only growth stocks have P/E's that high and thats only assuming they can keep that level of growth up.

[John Pseudonym]

Randomly pick a web server and you will find a server running linux.

Microsoft has lost that war.

Now the battle moves to the desktop. For now, Linux is for the enthusiast; but it's desktop day is coming.

[pricci]

algoa456,

"People use Windows not because of WIndows, but because of the range of WIndows applications." I agree completely... that's why Apple now let's you run both operating systems on a MAC. Check out Boot Camp and Spaces ( www.apple.com/macosx/features /)

You can't do this on a Dell or HP PC...

[MGX]

John, re: webserver share. I guess you haven't seen the data for the last 3 years: news.netcraft.com/archives/web_server_su... . It looks like MSFT and GOOG are stealing market share from LAMP like crazy, and Server 2008 was just launched.

Re: AAPL vs MSFT valuation, that's just silly. AAPL market cap is 50% of MSFT but generates 24% relative income! In absolute numbers MSFT has 400% the net income of AAPL. I'm bullish on both, but AAPL seems to have quite a lot of growth already priced in, while MSFT is priced at 0% growth already. They are different businesses though, and numbers do not tell everything.

[deasys]

@ValueInvestor:

According to NASDAQ, AAPL's forward P/E is 23.4.

[karchad]

It's cool to dump on Microsoft in the field. It's like, the thing to say. Meanwhile, they're still the only environment that provides one with a complete environment to develop software. Other environments you have to patch together an amalgamation of 3rd party tools... Yes indeed, Microsoft and Windows will take a very long time to fall under its own weight.

[jescott418]

The same things were said about Apple a few years ago. They were a company with only a few die hard geeks who kept the company alive.
I think every big company has some flops. Obviously Vista is no XP. I really think Microsoft wanted a clean break from the past with Vista. But they got cold feat or preasure from third party vendors. Apple has more control over their hardware and software so clean breaks are much easier. They pretty much just say to the venders take it or leave it. Microsoft needs to do the same.

[Jimmy Goodwin]

If Vista has equal performance to XP for gaming, then Microsoft wouldn't be in this mess. Word gets around the internet fast and pc game lovers dominate the net.

[David Lentz]

I doubt that Microsoft will ever completely melt away. After all, even Novell is still in existence. Just the revenue from (software bundled with) PC hardware replacements brings in more Microsoft profit on a quarterly basis than Apple makes in gross sales annually.

I'm happy with the current "melt rate", as Apple would not be able to adjust to accommodate the increase in business if it gained market share much faster.

I don't want Apple to choke on the flow of customers if Microsoftees were to defect in droves. A few percent a year is plenty to keep Apple growing and their stock soaring.

[algoa456]

Pricci,
this is an investment site not a techie chat room so I apologize - but I just want to set the record straight. Macs have problems running Windows apps that use sockets. Unfortunately it does not work properly.

More to the point MSFT is still pretty profitable and it is dangerous to succumb to the wishful thinking of the Windows haters that MSFT is going away anytime soon.

[Brewer]

@algoa456

You must be thinking of emulation when you are talking about sockets, or else you are thinking of development issues, and what is difficult to port to other platforms. There is no such issue with any application. There is no application that won't run on an Intel Mac. As far as any of the software is concerned, it's a PC. (The hardware is essentially PC hardware.)

Buying a GENERIC PC (one that doesn't legally run Mac OS) gives you no advantage, and you are stuck with a lot of older technologies (for the sake of Microsoft) such as BIOS. Macs have EFI. This is why they boot so incredibly fast and make even the newest 'hottest' :-) PC look like a relic by comparison.

You think it's dangerous to underestimate Microsoft. That's funny, I think it's dangerous to underestimate Apple. After all, it was Apple that started the PC business in the first place, and then revolutionized it with the Mac. Microsoft has only followed suit. Their strength is in recognizing a trend, not in creating one. Now, they have no way to re-create themselves. Yeah, they aren't going to go away right away, sure. But Apple will continue to gobble up their marketshare.

[Tom Caldwell]

IBM has had VM computing via a terminal for over 20 years. It never took hold. Remote VM, via a web browser, or SaaS based OS and office suites may pickup some share, but nothing beats the power of a traditional micro machine. I've ran linux and been quite unimpressed with it's lack of support and lack of applications. Several independent studys show "nix" based operating systems to be just as flawed (see secuirty) as Windows, albeit they are not attacked as frequently because the user base is much smaller.

We are a data mining company that does analysis of e-mail and networks. I've seen infected iPhones and Windows mobile devices spewing out spam/viruses. We've found enterprise based linux servers that have been comprimised. The security arguments of Windows vs. "nix" are quite dead, in fact they are an laughable insult to a real security insider.

I'm not overly impressed with Vista, and I still love my XP laptop and won't be upgrading it. The most important factor is I'll NEVER use, nor have my employees use anything but a Microsoft based operating system.

[seeksome]

windows collapsing what a JOKE! MSFT is a buy at this level.
seeksomething.com

[steveballmer]

Now that is just a bunch of baloney!
These "anallyst" say we may only have five years left before we are yesterday's news, RUBBISH! (excuse my language) Do any of you people know how much money we have? How many people we hire? How many design committees we have?

Please just dismiss this latest report by the "experts" claiming that we are clueless about what you people want! We know, I know exactly what you want!

I'll prove it, you want:

1. Computers integrated into your furniture! ie: the Surface Coffeetable.

2. The ZunePhone! Those who have bought iPhumbs will trash them when we release ZP1

3. A Home Server in the basement! It will control everything from lights, to backups, to toilets.

4. All subscription Software! Why buy Windows when you can rent it?

5. Software so secure that even you can't get in it! (Cancel or Allow?)

6. XP to be killed so that everyone can experience Vista, even if they are too ignorant to know it's a must-have! We will choose for you, don't worry!

... What these "anallyst" have not factored in is the fact that Bill will be gone soon and me and my rubber-stamp team will lead Microsoft into this glorious future as Ballmersoft!

Now I KNOW you feel better!

[Thomas Barta]

"Meanwhile, [MSFT is] still the only environment that provides one with a complete environment to develop software. Other environments you have to patch together an amalgamation of 3rd party tools."

My developer friends tell me Apple's free "XCode" is years ahead of MSFT's dev tools.

"If Vista has equal performance to XP for gaming, then Microsoft wouldn't be in this mess"

I thought PC gaming was irrelevant now. Doesn't everybody game on consoles these days? I don't know-- I'm too busy to game. Actually, anybody who really wants to stick it to MSFT should go out and buy an Xbox-- they lose money on each one sold.

[User 77690]

You all are saying this wrong. I am also an IT guy for 15 years, but I do mostly mixed environments - AIX, Linux, Solaris and Windows Servers. I do Mac OS X personally and I use *nix tools in it such as fink GNU package installer and ports. I write and test my unix scripts on the Mac. I do not need CygWIN or MinGW that a Windows guy would need to do the same. Having explained myself and why I personally use a Mac I will comment on why windows has the desktop.
It's got nothing to do with us IT guys or the IT department head's choices. MSCE's withstanding, the issue is with the non-IT people, sales, administration, HR, etc that use a computer to massage document formats or data. True that you can do these functions in a Mac and stylishly more so, but it will cost double in the short term. And that IS what the bottom line is for any company in America, perhaps some parts of the world as well. the bottom line is money and saving money for spending the least on IT. thus the $300 DELL desktop...it will not outlast the durability of the Apple systems. but it will do this kind of jobs that are GUI just fine. IT is there to refresh the images of those computers and filter out the ubiquitous WIndows viruses from them.
What none of you have said, is that as the world moves to have double or triple the amount of computers (personal) than the US has now. The system of choice for them is the $0 solution, the Ubuntu stuff.
If you will only follow the foreign news...even a country like Germany, had 20,000 PC's turned into SuSE boxes (why SuSE ..not Ubuntu..because SuSE is german. and familiar is good. we do the same thing here...we don't like UNfamiliar as well)
So, just give it time...and Windows is out of the picture.
Apple, just hang in there, that your niche is just perfect...
Linux is just to replace Windows. it is not a niche, but a revolution to overthrow eventually Windows, which overthrew DOS and OS/2.

[User 77690]

BALLMERSOFT - man, you really outdid yourself with that name...in SPANISH is EL CALVO SOFT because he is bald.

[MAG]

I am just a little guy, I like Windows, purchased another laptop with MS's vista, love it too. Absolutely no problems connecting my home network. Long live MSFT

[GeeFive]

Refreshing to find intelligent feedback; perhaps more interesting than the articles.
Salamat..

[Voice of Reason]

As both a Microsoft long time user and investor I can say it SUCKS on both counts. Big time.

[fredhead]

Burns (BillG) and Uncle Fester (no translation necessary) are greedy monopolist's. Pay a decent dividend and then people would get back into the stock. I mean who can trust anybody with 50 billion laying around? Pretty easy to support any type of reporting scenario with that type of cap to work with. Windows is the Microsoft Golden Goose, and if it does start to "melt" and lose market share..sell,sell sell!