It had become popular in the mainstream media to popularize the “dying” of Microsoft. This is absurd. What is common with a “dying” company is a deterioration of its financial position and diminishing assets. Microsoft is a money machine.
I’m not saying that Microsoft does not have challenges. I’m just saying that the negative sentiment against the company does not reflect certain business fundamentals.
For example, you would think with the amount of negativity focused on Microsoft, it would be losing money or be experiencing declining profit margins. Here are Microsoft’s net income numbers for the last three years:$14.5B (2009), $17.6B (2008), $14B (2007). Wow, sounds terrible. They are hauling in at least $15B a year. In the worst two business years in recent history, they made more than $30B in profit. Wow, what a terrible run!
While we’re at it, let’s take a look at their balance sheet at the end of each of the last three years. Here are their total current assets: $49B (2009) $43B (2008), and $40B (2007). So, Microsoft has built the value of its balance sheet assets — the bulk of which are in cash and long-term securites — by several billion dollars over the last few years.
Does that sound like a terrible business to you? One in which you wouldn’t want to own? Does it sound like a business that’s decaying? Not to me.
It’s true that Microsoft has some issues, especially in markets such as mobile, which are not part of their core profitability. I will address these issues tommorrow. But to describe their business as “imploding” or decaying is simply ridiculous.
The fact remains that even if Microsoft does come under further “assault” in its core operating systems (OS) and business applications business, it is going to take many, many years for any competitor to do any serious damange.
Yes, Google and open-source developers have been attacking Microsoft, but they have actually made very little impact it the core Fortune 500 enterprise market. These IT departments still buy Microsoft products, they are trained to manage Microsoft products, and they feel like they won’t get fired buying Microsoft products. Expecting that they will suddenly flock to the next free Web application or open-source project is unrealistic. I will take another decade to change this.
In the meantime, the company keeps printing cash. And the stock is cheap.
(Disclosure: Long (Disclosure: Long Microsoft)