<OT> The Evil Empire Continues to Prosper

[Joel Hammer]

Just some excerpts below from a WSJ article on MS. The NYTimes ran a
similar article.

http://www.nytimes.com/reuters/technology/tech-tech-microsoft-earns.html
(This requires registration, but, everyone should be registered with the
NYTimes, anyway. It is free.)

Of interest, in the NYTimes, one city in Canada switched a lot of its PC's
over to StarOffice, cutting software costs 85%. But, even that guy said he
would switch back to MS if MS lowered its price.

It is very interesting that under their subscription plan, people who have
continuously upgraded their software to the latest and greatest will save
money, whereas the frugal types among their customers, those who haven't
felt the need to upgrade frequently, will spend more.  Certainly, there
must be commercial opportunities here for alternative software vendors. I
guess one challenge would be to find out who these frugal types are and
approach them with alternatives. As usual, though, you would have to
start at the top, since the lower down people will be likely MS droid's
incapable of thinking in non MS terms.

Warren Buffett emphasizes in his writings the importance of investing
in companies which have a "franchise." That is, some sort of market share
that allows it pricing power. For example, a farmer selling wheat is the
worse possible investment, since he has no pricing power. He just sells
an easily available commodity to the highest bidder. Wheat is wheat.
There is no brand name here. Same for an airline. Tobacco, on the
other hand is a good business. Addiction combined with brand loyalty,
to quote Warren. 

So, give credit where is it due. MS has created 100's of millions of
addicts with brand loyalty, in and out of business.  Bill will now start
to seriously squeeze them.  This will be fun to watch, especially if
you own MS stock.

Now, that IS evil. 

Joel


SEATTLE (AP) -- Microsoft Corp.'s profits more than doubled from a year
ago as a new, controversial software licensing plan helped drive sales and
insulate the company from the turmoil hitting the technology industry. The
software giant also was able to stem losses from investments.

For the three months ended Sept. 30, the Redmond-based software maker had
a profit of $2.73 billion, or 50 cents a share, compared to net earnings
of $1.28 billion, or 23 cents a share, for the same period a year ago.

Microsoft cited a higher-than-expected enrollment in new,
subscription-like licensing plans that require companies to sign
multiyear agreements and pay annual fees in return for rights to software
upgrades. The new plans also eliminate many discounts that companies
could receive when they chose to upgrade.

The company also announced Windows XP sales have hit 67 million since the
new operating system was launched in October 2001. It also saw strong
increases in revenue for its MSN Internet access service, as well as a
14 percent jump in sales for its server software and related products.