Vista on the horizon
Regardless of what you use on your personal computers, you should be certain of one thing: Microsoft (MSFT), the stock that has been stagnant throughout the bull market of 2002-2005 will rise again.
Windows Vista, set to launch with much fanfare sometime in 2006, will bring about a few interesting changes: a fresh look since the tired Windows XP look, built in search features, and Urge.
Urge is Microsoft’s reply to Apple iTunes (AAPL), however, it seems to be similarly minded with Musicmatch, Napster and Rhapsody that offer ‘all you can eat’ subscriptions, unlike iTunes. Arguably the largest setback to its wide adoption is it’s lack of support for the iPod, which monopolizes portable digital player sales. This is a big handicap which means that unless a new music playing device becomes mainstream (perhaps one that has runs Windows?) the iTunes lead for music downloaded for portable use will remain.
However in our fascination with iPods, we might be forgetting one thing: we still listen to a lot of music indoors. And this is where Windows reign supreme. Given the easy accessibility that Urge is bound to have from the operating system, it should be easy to see how the service will shine just like Microsoft Windows Media Player has shined since it launched with Windows XP, to the dismay of RealNetworks and the European Union that has an outstanding fine against the company for its media player monopoly.
This is not the first time the company has done something late in the game but has managed to beat the competition nonetheless. The Windows operating system, to name one, is based on concepts pioneered by Apple and Xerox. Microsoft may enter slowly into new and untested areas, but has managed to secure its position in each with relative success.
An exception to this rule has been internet search, as critics will point out. I personally switched to Google (GOOG) from MSN Search several years ago, when MSN Search decided popups might be a good idea for their site. Ever since then, I’ve not used it much except to test their revamped services, but needless to say it has not managed to budge Google’s market share much. To do so, it needs to provide users with switching incentives, like easy accessability, say from an operating system into which it was seamlessly embedded. To succeed with MSN Search, Microsoft has to address a growing misinformed bias that it does not do Internet technology well, loosely based on the Internet Explorer shortcomings, and best exemplified during the MSN-Inktomi years, when Yahoo! and MSN Search were run by the same engine yet users would rank (identical) results as worse from MSN than from Yahoo.
This can all change with Vista: Microsoft gets an opportunity to show innovation is still a priority with the software giant, upgrade Internet Explorer and enhance its security features, and the accessibility of MSN search in Vista as well as its proximity to the new Desktop Search will give it a fresh advantage. For Microsoft, 2006 is promising - and MSFT might even break out of its stagnant $25-$30 window where it has been stuck for the past years despite its rising profits and relatively low P/E ratio.