Good bunch of posts here, all. Thanks!

Lightning said << Your approach to investing sounds Buffet-like, which obviously works but that sort of thinking totally misses the way tech corporate value is changing to include intellectual talent and marketing power. Even when smartass companies come out of nowhere to compete on some level, Microsoft either buys them or drives them into the ground. Their acquisitions have been prudent and increase long term shareholder value.... If a fair valuation included their intellectual book value and brand power, it's stock price might not seem so out of whack. >>

I think this (and the other parts of Lightning's post, too) hits on something important that usually isn't fully taken into account. It might be trite to say this, but isn't it possible that we really ARE living in different times?

It's possible to find counter arguments for almost any point made about Microsoft. But the fact is, there is really no precedent for the totality of what Microsoft is. I would be prepared to argue that that totality defies analogy, whether to Coke, or AT&T, or etc. Simply considering the amount of activity that Microsoft makes possible, and indirectly sets in motion, well after it has directly benefitted from a sales transaction with a Microsoft customer, suggests this is not your ordinary company. Microsoft may well stand in for what in a different era would have been several companies, perhaps across unrelated industries. Microsoft arguably constitutes an industry in itself. And by that I am not referring to market share. Microsoft operates on a scale that goes beyond market share and other easily measured variables.

To be honest, I've never been quite satisfied with the analogy to Coke. It works for some points of correspondence, such as market share, or matters surrounding brand, which are intimately related to each other. Those are profoundly important points. But there are too many differences between KO and MSFT to fully get at the Microsoft phenomenon. And it doesn't get to the parts that bug people. The KO-related points are generally granted by the anti-Microsoft crowd. Something else is bugging them.

Let me throw out as an idea that it might be of some use to compare Microsoft to the oil industry.

Doing this requires right off that we ignore the marketshare factor, since (I'm assuming) there isn't a single oil company that comes close to matching MS on that count. But that's OK. In fact, it's good. I think Microsoft's marketshare can be a distraction from other issues. As a practical matter, let's just use the oil industry in general. This is valid because a) part of what I'm suggesting is that Microsoft functionally stands in for multiple companies, if not an entire industry, b) we are dealing with something unprecedented in its totality, and c) analogies are never perfect on all counts, so... what the hey... we're just playing with ideas among friends.)

An objection could be made to an oil analogy because, what in Microsoft's operation corresponds to the actual oil, which is, after all, a virtually sacred substance? Well, it goes something like this....

Microsoft's core product is embedded into the economy in a way that corresponds, in its plane, quite closely to the position of oil.

The physical... material... mechanical... "real" world is built up and kept in motion by oil.

Correspondingly, the intellectual... abstract... informational... "virtual" world has been built up... that is, has come to operate on a platform... that is set and kept in motion by a product that is specified and used under the terms established by Microsoft.

Today, Microsoft's operating system functions within a society dependent on and organized around the distribution of information, made possible by communications technology, in a manner that corresponds to the way oil formed the "operating system" of a society dependent on and organized around the distribution of goods and people, on a scale made possible by industrialization.

It might seem off to refer to oil as an "operating system." But I think doing so is quite valid if we consider just what the operating system is.

The operating system embodies practical and expedient and utilitarian assumptions about the necessary and the possible, about what is correct and what is error, about what is good and what is not valuable. It establishes a most rigid relationship between these things, between these attributes of the things we do. It institutionalizes these relationships. And once adopted, it sets in motion ever more complex activities that develop momentum of their own, but that nevertheless remain essentially tied to their point of origin -- that is, the system that set them in operation. The operating system.

Thus oil constituted the "operating system," so understood, of full tilt industrialization. Likewise, the last decades of the 20th century saw Microsoft gain control of a critical mass of information technology through the practical, expedient, and utilitarian mass adoption of its operating system. (In fact, it could well have been some other company's OS. I don't think saying that detracts from or minimizes Microsoft's accomplishment at all. On the contrary. Microsoft rose to and met the historical circumstances, ultimately seizing the opportunity for itself. But the circumstances were not Microsoft's. This is another tangent, however.)

But in this Microsoft/oil analogy, what corresponds to the oil itself? To the commodity? It is obviously not the material product that Microsoft produces. And it's not the bits of code which actually get distributed, and with ever fewer material components. What is it then? What does Microsoft actually have, or do?

This is where the analogy to oil might start breaking down. But it's also where we start getting to one of the essences of the Microsoft phenomenon.

<sigh> But it's also where I need to stop right now. I've got blisters on my fingers, and my head hurts. But I know where I'm going with this, and can knock it out if anyone's interested in my ravings.

And to all a Foolish night. :-)

TMF Nico