Microsoft’s lack of momentum, malaise won’t end anytime soon

“If you’re holding your shares of Microsoft until you can book a 10% capital gain, we have a bit of bad news. You may be waiting a very long time. Despite a spate of happenings at Microsoft — including its much heralded $3 dividend and the hiring of Ray Ozzie and the acquisition of his company — the giant tech stock has refused to edge upward,” Bill Snyder writes for TheStreet.

“Making matters worse, Microsoft’s inertia doesn’t seem to be a short-term malady. The company’s top-line growth has slowed while buyers wait for the next generation of Windows and a raft of related products. And even when the new software hits the market in late 2006 and 2007, it is not at all certain that it will give sales the kind of boost needed to get the stock moving,” Snyder writes. “Strong sales of PCs, nearly all of which run Windows and Office, would certainly help. But that won’t happen in the short term. Growth in the worldwide market for PCs is expected to slow to 9% in 2005, down from last year’s faster clip of 11.6%, according to Gartner, a technology research company.”

Snyder writes, “The trouble is, it is taking more and more of an effort to push consumers and businesses into upgrading their hardware and software. Simply put, many people are happy enough with what they have, despite well-publicized security flaws and other problems with the company’s software.”

Synder continues, “[Windows] Longhorn, scheduled for release next year, is likely to be a significant improvement over Windows XP, but it will lack some of the snazziest features originally promised by Microsoft. ‘It will have nice-to-have features, but not must-haves,’ says Martin Reynolds, a vice president and research fellow at Gartner. Moreover, it will take businesses several years to get comfortable with the new operating system. The shift to XP, which has been on the market for almost four years, is not yet complete, he added.”

Read Synder’s full article, “Microsoft Feels Like Lead,” here.

MacDailyNews Take: If “people are happy enough with what they have” then why does Credit Suisse First Boston expect total Mac units shipping in the fiscal second quarter to rise 35% year-over-year, above the research firm’s PC industry growth estimate of 10%? And why, for the last quarter of 2004, did Apple’s Mac shipments grow more than 25 percent, according to IDC, while the PC market as a whole grew at 13.7 percent (even before the debut of the Mac mini)? If Wall Street ever puts two and two together, AAPL shareholders better strap themselves in for blast off, there’ll be no lack of inertia for them.

[UPDATE, 11:13am: fixed headline, changed “inertia” to “momentum.”]

Related MacDailyNews articles:
Apple Q2 Macintosh shipments expected to outpace personal computer industry – March 15, 2005
BofA analyst: Mac mini likely to significantly strengthen Apple’s market share – March 14, 2005
Apple’s Australian Mac sales surge a massive 49.1 per cent, share jumps from 3 to 4.1 per cent – February 21, 2005
Apple’s Mac is not doomed to small market share forever; the ‘Ignorance Lag’ is ending – February 11, 2005
Analyst: Apple Mac worldwide market share could increase to 4.5 percent by end of 2006 – January 24, 2005
Mac mini is going to dramatically improve Apple’s share in the personal computer market – January 23, 2005
Apple shows strong Mac shipment growth, market share gains in fourth quarter 2004 – January 19, 2005
Report: Apple gained significant market share of computer industry during past quarter – January 12, 2005

29 Comments

  1. to MDN

    Personally, I know several ex-Windows users that have switched to Macs thanks to iMac G5s and Mac minis, despite the fact that the minis have only just started shipping here in the UK. I’m sure a lot of the business is coming from OS9ers upgrading, but from my experience, the amount of Mac users in total is dramatically increasing.

  2. “to MDN” your comment above is not factually correct. Although you are correct in pointing out that many previous Mac owners are upgrading to a Mac mini or iMac G5 to be able to more readily take advantage of modern technologies like cable/DSL, WiFi, Bluetooth, and the iLife apps.

    Your line about; “But don´t expect much business to come from the Windows converters. Yeah, there will be some.” is way off-base. Of all the Macs I sell now, about 50% are destined for Windows switchers. Many of these consumers actually owned Macs previously way back when in the early nineties. There is a flood of this type of buyer, many of whom have been favorably impressed by their iPod experience and others who are totally fed-up with the nonsense of spyware, viruses, pop-ups and other assorted nuisances associated with Windoze.

    Now does that mean Macs will suddenly go above 10% market share, no. But I believe a move from 3% to 6% worldwide in the next 18 months is doable. This may not look that dramatic, but represents a sea-change in buyers’ attitudes and will be the opening of the floodgates in subsequent years.

    Apple is wildly profitable and the timing of Tiger couldn’t be better. At the same time major players (like HP) on the Windows side barely squeak out a token profit from their PC biz. And MS is suffering from a malaise that is surprising from such a previously kick-ass company.

  3. Microsoft is only still moviing because they HAVE inertia (tendency of an object at rest to remain at rest or an object in motion to remain in motion). The engines are off and nobody is at the wheel. Pretty much a train wreck waiting to happen.

  4. The MS problem is simple – a lot of people just stick with the OS that came with their computer, even if it is 3.1 or 95. If it works why would they want to spend money on another OS that will slow down their computer? They’ll get a new OS when they get their next computer – if they DO get another one.

    Throw in Linux and OS X, which are additional drags on Windows sales, mix in a virus/worm/spyware or two. Then add the burden of having to be backward compatible.

    MS has problems – no wonder the stock is stuck.

  5. “I’m pretty sure that on one episode of “Star Trek: Enterprise” I heard Captain Archer say “we’ll let our inertia carry us in” (or something like that!).”

    Actually Anon, Captain Archer is technically right. In space the Enterprise could be inert whilst still travelling at a constant warp-speed. Once the initial motivation has accelerated the star ship to a desired speed, the crew could switch the engines off completely and the Enterprise would remain, inert, travelling same speed forever – or until Captain Archer applied further forward or reverse motivation.

  6. Twenty Benson – actually I’m pretty sure the Enterprise wasn’t travelling at warp when he said it.

    “Once the initial motivation has accelerated the star ship to a desired speed, the crew could switch the engines off completely and the Enterprise would remain, inert, travelling same speed forever – or until Captain Archer applied further forward or reverse motivation.”

    I don’t think Star Trek warp engines work this way – if they did, then an enemy shooting at your warp nacelles wouldn’t automatically bring you out of warp – which happens quite a lot in Star Trek. Also, they never turn off their engines while under warp – if it were possible I’m sure they would have done it.

    Nice try though!

  7. Retail boy: “Of all the Macs I sell now, about 50% are destined for Windows switchers. Many of these consumers actually owned Macs previously way back when in the early nineties.”

    So they are Mac owners that probably still have their old macs stuck in a closet, switched to PCs (how did Apple lose them?) and now need a replacement. A mac owner.
    If a person owns macs and Peecees – is he/she a mac owner or a Pc owner?

    “And MS is suffering from a malaise that is surprising from such a previously kick-ass company.”
    Agreed – Steve Ballmer must go. Gates has to be retired to poster boy.

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