Stop or I'll shoot… myself
Microsoft’s latest competitive brainstorm is to give away Office, its flagship product, in online form. This recalls an old comedy scene, in which a thief, cornered by police, points his gun at his own head and says, “Let me go or I’ll shoot!”
The media inexplicably painted this as a countermove against Google. But, ah, how is dropping your own price to zero an offensive maneuver?
Microsoft still has momentum, but two big things changed in July 2009.
- For the first time, a competitor with vast engineering resources pledged to release a free alternative operating system. It will run on netbooks, the fastest-growing computer segment, and where Microsoft is weakest due to performance problems.
- For the first time, Microsoft pledged to give away a version of Office.
Most of Microsoft’s profit comes from those two products, and ever-increasing price pressure is now nearly certain. I had purchased MSFT very cheaply last November at about 20, on the stock market swoon, and was only too happy to dump it at a 20% profit last month.
One risks later embarrassment by mentioning specific trades, and that may well happen here. I prefer to hold for years, so this runs against style. Moreover, I still think MSFT could have years of stability ahead. But I’m less sure of it than before. Selling now offered over 30% CAGR pretax. A very pretty bird in the hand.
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