Opinion: Microsoft’s $40 billion patch fails to impress

Posted by Dennis Sellers Jul 23, 2006 at 9:39pm

Microsoft launched a desperate late day announcement last Friday in order to save face after their early morning stratagem with Wall Street failed to impress. The unimaginative Microsoft stepped into high gear with their traditional smoke and mirror chicanery in order to create a media frenzy side show about a so-called iPod-killer.

However, the real news of that day was in fact more embarrassing for Microsoft and the Wintel machinery as a whole. On Friday Microsoft announced that quarterly profits dropped 24 percent. In an attempt to have Wall Street turn a blind eye to that blunt result, they announced plans to buy back up to $40 billion worth of its stock through a $20 billion tender offer and a five-year share-repurchase program.

Yet according to a Friday Yahoo Finance report from Reuters titled “Stock buybacks boom, where’s the bounce?” they state that if “Truth be told, though, share buy-back plans often fail to deliver their intended effect of buoying companies’ share prices in the long term.”

“Only a small percentage of companies are really making a difference with their buyback programs,” said Henry McVey, chief U.S. investment strategist at Morgan Stanley. “Buybacks help to increase earnings per share by reducing shares outstanding. They can also provide a floor for a company’s stock price by creating steady demand for shares, and, as a sentiment indicator, they may be viewed as a signal that management believes the company is undervalued. But share repurchases do not necessarily improve a company’s underlying long-term performance, and can be interpreted as a lack of smart ideas for deploying cash.

“If a company buys back its stock because it has no good place to invest, it might be signaling deterioration in earnings prospects, said economist and financial analyst Stephanie Pomboy of MacroMavens in New York.”

Therefore if you take Stephanie Pomboy’s point of view into consideration, you could only deduce one thing: Microsoft’s paltry $1.02 gain recorded on Friday was all the confidence that Wall Street could muster for Microsoft. All that Microsoft got for their eye-popping $40 billion buy back was one hell of a slap in the face that could be heard around the globe. That certainly speaks volumes in my books.

In respect to Microsoft’s results being an embarrassment to the Wintel machinery as a whole, I say that because it was evidenced by Dell’s decision to time an earnings warning. Dell pre-announced that they would miss their forecast by a whopping 10 or more cents per share. So, let’s face facts, shall we. Microsoft’s inability to launch their next generation operating system clunker dubbed Vista has hurt Dell. And, without a doubt, we’re likely to hear this common moan from other Wintel OEMs in the coming days, weeks and months ahead. So, with egg all over their face, Microsoft had to do something else besides announcing their buy back program in order to win favor with the press and change the topic.

Plan B: Attack the iPod

With plan A’s stock buy back program failing to impress the market, Microsoft kicked into high gear with their PC Press puppets dreaming on an iPod Killer, again. Why again?

In January, gadgetell reported that Microsoft had said that they were disappointed that no one had created an “iPod killer and may have to do it themselves. In March, the Mercury News stated that Microsoft claimed it had some of its most seasoned talent from the division that created its popular Xbox 360 working on it. Of course that was in context with Microsoft’s then-iPod-Killer project dubbed Origami. And once the reality of that project came to market, the disappointment was echoed throughout the PC press that once helped to hype the dorky toy. The hype never matched Origami’s reality. At the time, I found that the BBC News covered this disappointment best when they starkly stated that “Unfortunately, early information about the first Origami device, aka the ultra-portable PC, shows that the reality falls far short of the glossy video and Bill Gates’ hopes.”

Hmm – and to think that Microsoft had summoned their very best Xbox 360 engineers to work on Origami. Yikes! So should we expect anything less than a disappointing failure from a second, third or fourth Microsoft iPod-Killer? No. But don’t tell that to the PC press puppets who are once again caught up in listening to the Pied Piper in Redmond. Like idiots, they’re once again dancing merrily along Redmond’s self-created Yellow Brick Road of hyperbole in a stupor.

Microsoft’s real killer product

Microsoft’s pathetic nature of copying industry leaders like Sony, Apple, RIM, Netscape, Google, Novell and Symantec is simply historical reality. They don’t innovate, they imitate. In fact, their best kept secret is anything but. It’s called “Developer-Killer.”

A case in point is their savage attack against RIM and their market winning BlackBerry. In that case, Microsoft even went so far as to get involved in RIM’s legal case in order to ensure that RIM got showered with negative press on a daily basis. The reasoning behind that charade was to hurt RIM as much as possible in the press just prior to launching the all new Motorola/Microsoft “BlackBerry Killer.” How in gods-name that isn’t considered illegal, is just beyond me.

At that time C/NETreported that “NTP co-founder Donald Stout stated that his company is not too concerned that Microsoft’s court filing will reopen the case and leave NTP vulnerable for a retrial. Instead, Stout said Microsoft probably took its steps because it considers RIM’s domination of the wireless e-mail space a threat to its own Windows Mobile software plans. They’re very concerned of what will happen if RIM continues to gain market share.”

Hmm, sounds like the whole Netscape argument all over again, doesn’t it? Yes, of course. And the list just keeps on growing. In fact they’ve just handed Symantec a copy of their ‘Developer-Killer” called “Windows Live OneCare.”. Can’t you just feel the love!

Yes, one by one, Microsoft is knocking off or aggravating the hell out of their most profitable developers that once helped their clunky Windoze platform rise to fame. It’s more like watching a crocodile eating its own spawn. And didn’t you hear? Microsoft’s “Developer-Killer” is coming to a developer near you! Now how cool is that?

The bottom line

The bottom line is that while it may appear that Microsoft succeeded in gaining a partial victory by getting their PC Puppets to go along with their Friday stratagem – the reality is that Microsoft’s $40 Billion stock buy back Patch failed to impress Wall Street – where it counts on the bottom line.

At the end of the day, Microsoft, or better yet the little boring PC man, is simply seen as being completely obsessed and preoccupied with Apple’s successful iPod revolution. In fact, Microsoft’s attitude on Friday was really sad. They didn’t own up to their failure of not launching Vista in a timely manner, in the least. It just seems as if all they care about is one thing and one thing only – delivering an iPod-Killer. The rest of their Wintel developers and OEM partners – be damned.

So stay focused, as the real issue remains Microsoft’s failure to deliver Vista in a timely manner. Their iPod-killer side show is just entertainment for their press clowns. Origami was a joke and their next iteration will be as lame and as buggy as their latest release of Internet Explorer is today. If they can’t even get their act together on a simple browser, then what hope is there for Vista.

When it comes to excellence, we’ll see how it’s really done soon enough. Apple’s next generation operating system dubbed Leopard will be previewed on August 7 and their next generation iPod will launch this fall. You know – real products, real innovation and really cool hardware that consumers can actually get excited about.

(JavaScript must be enabled to view this email address)

Advanced Search

Article Information

Comment on this Article Print this Article Email this Article Digg This

Contributor

Recent Articles