MSFT Best Long Idea, Says Arete, Yanks AAPL Recommendationhttp://blogs.barrons.com/techtraderdaily/2012/10/01/msft-bes...Boutique research firm Arete Research’s software analysts Adam Shepherd and Alex Trout today sent a missive to clients reminding them that Microsoft (MSFT) remains one of the firm’s “Best Ideas” for long stock positions, while their colleague Richard Kramer covering Apple (AAPL) advises that its time to pull the plug on that stock as a Best Idea.Shepherd and Trout, who have a $40 price target on Microsoft shares, write that the release of Windows 8 by Microsoft on October 26th will solve a lot of problems for Microsoft, including how it deals with the consumer PC buying market:We see Windows 8 as a panacea for Microsoft’s consumer franchise, as it pushes into the device market and accelerates the transition to a subscription-based software model. In the long run, monetising services cuts Microsoft’s reliance on OS and Windows licencing, allowing it to drive revenue growth in a world dominated by ultra-low cost devices. We think Microsoft can see the first leg of an upward re-rating based on the successful launch of Windows 8.
Shepherd and Trout, who have a $40 price target on Microsoft shares, write that the release of Windows 8 by Microsoft on October 26th will solve a lot of problems for Microsoft, including how it deals with the consumer PC buying market:This is an uber optimistic view, I think. I don't know what the compelling reason is that users will upgrade to Windows 8, except that it is similar, perhaps even "compatible" with Windows phones and tablets, none of which anybody yet owns.In the meantime it presents an entirely new desktop and learning curve to users which may or may not be well accepted, and in fact which may or may not work better than what they're already used to.Will Windows 8 show up on desktops? Of course. Some early adopters will buy, and new machines will ship with it, and eventually it may gain a foothold (or it may be a big hit right out of the box, except that unlike Vista, most users are content with 7, I think), but in the Windows world that upgrade cycle can take forever. Will IT department managers rush out to upgrade? I'm skeptical.I do understand how it pushes into the device market, except it's being sold on PC's and if it doesn't gain traction there quickly it's dead, and I don't see how it accelerated the transition to a subscription based software model, but then I haven't paid very close attention to that part of the hype.Are they right? I have no idea, but it seems the prediction is based more on dreams than on any substantive analysis of users, preferences, costs, revenues, or much of anything else.
Right now, Intel is still having trouble with power management software for the Surface. Windows 8 will be a very, very slow upgrade, especially in the business segment. It's not a really good fit for business anyway.The upgrade price is very cheap, so I doubt that will provide much in the way of revenue increases. I can only think that Microsoft hope that most W8 customers will have touchscreens, and not be in the office.
Will IT department managers rush out to upgrade? I'm skeptical.They aren't going to have much choice. Many companies are cutting support for Win XP products the developed a decade ago, Microsoft has announced there will be no more updates, patches, fixes, etc. etc. for XP in 2014. Once it hits its zero date, vulnerabilities start to grow as any exploits found will remain wide open.There is a vast number of global IT desktop/laptop infrastructure soldiering on with Win XP. Those enterprises, from mom and pop shops the biggest corporate beasts are going to have to make choices, sticking with XP is not one of them.There is huge opportunities in the virtualization space - going to be lots of need for Win XP emulation/virtualization to run legacy corporate IT apps, that companies and governments have neither the talent, stones, and money to update.
They aren't going to have much choice. They'll still be able to upgrade to Win 7 for a long time, I suspect. And, while that will actually probably help MSFT's bottom line more than Win 8 upgrades (because Win 7 costs more), it won't do wonders for the Win 8 adoption rate. And, if the adoption rate is low, that will be another Vista-like PR mess for the company.The upshot of that is maybe (just maybe) it will finally get rid of Ballmer.dsbrady
They'll still be able to upgrade to Win 7 for a long time, I suspect. And, while that will actually probably help MSFT's bottom line more than Win 8 upgrades (because Win 7 costs more), it won't do wonders for the Win 8 adoption rate. And, if the adoption rate is low, that will be another Vista-like PR mess for the company.The upshot of that is maybe (just maybe) it will finally get rid of Ballmer.dsbrady___________________No way. He's lied about the adoption rate of every product for many years bow. Don;t worry, Kinect will pull them through.
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