Microsoft Is Cool Again

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  • HoloLens shows that Microsoft is capable of building hit products.
  • Microsoft’s third quarter results show that the company is not in danger of secular decline.
  • Microsoft shares are cheap when factoring out Microsoft’s cash position.

By Jay Smith

Microsoft (NASDAQ:MSFT) has a buzz around it that it hasn't had since Windows 95. Microsoft is cool again. Developers are dying to get their hands on HoloLens and program for it. Journalists are heaping praise while consumers are eager to try HoloLens out. Microsoft used to miss the great computing shifts. Although Internet Explorer was the world's most popular browser in the 2000's, Microsoft let Google (GOOG) (GOOGL) take a commanding lead of search and belatedly spent billions on Bing to catch up. In its attempt to crush Google, Microsoft missed the shift from desktop to mobile and let Apple (AAPL) become the world's most valuable company. Because it missed those big computing shifts, many feared that Microsoft was in danger of secular decline. Microsoft's cash cows, Windows and Office, were all dependent on desktop PC's, whose sales volumes decreased every year.

With HoloLens, Microsoft is on the leading edge of tech again. HoloLens looks slick, like something from a science fiction movie. With Microsoft's universal app technology, HoloLens will have thousands of apps starting off, giving it a strong advantage over Oculus or Google Glass. Given that the platform game is all about winning developers in the early stages, Microsoft's app lead could give it a leading market share in a winner take all market. In HoloLens, Microsoft could have something that rivals the iPhone or the desktop. HoloLens also shows that Microsoft's $11 billion a year research and development is paying off. It used to be that Microsoft consumer products such as the Zune were chronically late to market and dead on arrival. Now Microsoft R&D is making unique, leading edge products such as Skype translator, Surface, and HoloLens. More productive R&D means higher revenue and margins in the future.

Not surprisingly, many hedge funds and

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